If you are looking at rent to own homes listings, this is probably a new experience for you. You may rent a home multiple times in your life. You may even buy many homes. But most people only rent to own a home once in their lifetime.
You probably have a lot of questions about how the rent to own process works, and how to determine what is a solid rent to own home listing and what is not. You probably also curious as to how to protect yourself and make sure that you are making a solid financial decision.
Now we know that not everyone who comes to the site will get a rent to own home through our program. So here is some information to help you out as you review rent to own home listings.
First, some basics. Rent to own and lease to own homes are the same thing for all practical purposes. The term lease option is also often used interchangeably with rent to own.
You may have heard that most rent to own home transactions are set up to be strongly in the favor of the seller. The reason for this is that in the past, when getting a mortgage was fairly easy there was no incentive for sellers to offer their home as a rent to own homes listing UNLESS they were going to be able to make a significant amount of money. This usually entailed a down payment of $10,000 – $15,000 and a term so short that most tenant buyers did not have the legitimate opportunity to improve their financial situation. When the tenant buyer moved out they would simply remarket the home in rent to own homes listings and repeat the process. Clearly in this situation, rent to own houses did not work in favor of the tenant buyer.
The market has shifted significantly since this time and because the pool of potential home buyers has shrunk so dramatically, more legitimate sellers are willing to consider the alternative of rent to own homes. OUR sellers would all prefer to sell their home outright, and are renting to own their home simply because market conditions don’t allow them to sell home fast.
The bottom line is that if you are going to approach sellers on your own, you need to ask enough questions so that you understand their motivations. We talk to hundreds of home owners a month and believe me when I tell you that very few of them even have rent to own on their minds. Most of our homes come from home owners who are either advertising their home for sell or for rent and really don’t understand how rent to own works until we explain it to them. Given that, if an individual home owner is advertising their home as a rent to own home listing, you should understand that they just may be savvy enough to draft a contract that is 100% in their favor.
Ask questions. Make sure they really want to sell. You should also expect them to ask you questions and be interested in what you are doing to actually get yourself in position to buy a home.
Stay tuned for more things to consider as you are looking at rent to own homes listings.
If you would like to learn more about how a lease purchase or rent to own home can help you, please do not hesitate to contact us! And, if you haven’t already, consider enrolling in our very own Credit Repair College! It is quiet simply the best credit repair you can hope to find. If you have ever found yourself saying “I need to clean up my credit!” now is your opportunity! We will help you understand why what you can do for your own credit is so much more powerful than what credit repair companies can do! Once you have completed our audio and video training, you will be a credit report repair expert! I might even share a credit repair secret or two along the way!
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My boyfriend and I were approach with a rent to own option by his father. The house is a 3 story Victorian house that was build in 1880. It is currently on the market for 219,000 and i think would be a very smart investment for us being that for right now we were looking to buy a home for at the max 150,000. Basically my boyfriends father said we can rent to own the house for $800.00 a month, which is appropriate for what we can afford, but is that the final price at the end of the month or is there other fees that will be added into that $800.00, also what percentage goes towards the down payment when and if we decide to by the house. Also around-about how much if any of a down payment is typical for a rent to own option at the beginning of the renting stage? Finally is this a smart way to go?
Jessica, you have a lot going on here and I need to tackle the items one at a time. First, from your statements, I can only assume that the home is owned by your boyfriend’s father. Is that correct? If so, that can create a very precarious situation and have a significantly bad impact on their/your relationship because it changes from being a family relationship to a landlord/tenant or lender/borrower relationship. Second, I would be very cautious about acquiring a home built in 1880 and would definitely advise a home inspection. You have no idea what types of mechanical, electrical, structural, foundational or mold issues you may be dealing with. The payment of $800 per month for a $219,000 home is a steal but it is unlikely that your mortgage payment, taxes, insurance, etc., will be that low when you finally qualify for a mortgage and take him out. With respect to your question about additional fees, since this isn’t one of our deals and I haven’t reviewed a contract, I have no way of knowing what additional fees your boyfriend’s father may be adding in or requiring in the contract. Same thing for the percentage towards the down payment if you are dealing directly with your boyfriend’s father. That is something you have to negotiate with him. Typical down payments for rent to own deals range anywhere from 2%-5% of the purchase price at contract execution. It isn’t possible for me to advise whether or not this is a smart way to go without more of the details. On the surface, the only redeeming quality appears to be a low monthly payment and potentially ease of access to the property (since it is a family deal). Other than that, you are dealing with a potential money pit that you probably don’t have the funds to maintain based on the age of the home. Having said that, it may have been completely remodeled and brought up to code and be a great deal. We would need more details to provide an intelligent answer.