Rent to own homes: How rent to own homes works
For those
of you who aren’t aware of what rent to own homes is or simply “rent to own”
is, let me tell you: Rent to own homes, also known as rental purchase is a transaction
that is legally documented and which involves leasing of properties such as
houses in exchange for a monthly payment, with an option that the renter can
purchase the property at some point during the period of agreement. The practice
of rent to own property applies not only to housing but also to other properties
such as furniture or vehicles. Rent to own homes is quite a popular trend in
the real estate business and one frequently gets to see the “rent to own” signs
every now and then. The rent to own homes or lease to own homes have become
quite popular in cities where it is more feasible from a financial viewpoint to
rent than to own.
Many a
times, the buyers may not be interested in a property or may simply lack the
money to buy it. In such case, rent to own homes can be the perfect solution. There
are certain agreements to be made before finally renting a house on a rent to
own basis. Both the parties may face some pros and cons. This type of practice
is popular mainly in areas where the housing market is lagging behind. If you are
a buyer looking for a house but don’t have enough money for it, going for rent
to own homes would be the best solution for you as a buyer.
Rent to own homes- How it works Rent to own homes is quite similar to leasing a car. The tenant is given the right to buy the house at some point in the future which is usually within three years from the commencement of the lease. The tenant will then pay a regular fee also called option money which will keep the option of buying. Besides that, the tenant also pays 20% plus on the standard rent for the house so that a portion of that rent sits as the credit to the tenant as a down payment for buying the house. Rent to own homes have started to get popular because in most of the cases, it makes a good deal for both the buyer and the seller. Sellers who are having trouble selling their properties and can no longer afford the payment of mortgage opt to rent their house with an option to buy. The tenants who rent such homes are people who are cannot afford to buy a house and have a poor credit. With the rent to own homes option, they can have the opportunity of owning the home eventually within their period of tenancy. Rent to Own Homes: Cons Rent to own homes although is a great option for many buyers and sellers, it might not be the perfect option all the time. For example, if the tenant eventually decides on not purchasing the house towards the end of his tenancy, he doesn’t get back the extra money he paid to the seller. Therefore, he would have paid 20% above the market price on rent and end up losing that money if he chooses not to buy the property. Besides that, they also have to take care of the maintenance of the property during their period of tenancy. That said, some other rent to own contracts oblige the renter to purchase the home at the end of the lease. Therefore, you should be wary of reading the whole agreement in detail before signing on it. Rent to own homes scenario in case of buyers Stats say that many tenants who sign the rent to own homes contract fail to buy the property at the end of the lease for many reasons. Most of the time, they are in the same situation that they were at the time they rented the house: low credit or lack of downpayment Rent to own homes: Is rent to own homes always the right thing to do? It is now evident that rent to own homes may not always be the right option. For the seller, there may not be much to worry but for the buyer, there are certain drawbacks if the fail to comply to the agreement. If you are looking forward to a rent to own homes agreement, make sure you have proper financing or a good cash flow in place. Often times, it is a good idea to consult a bank for financing before going into the agreement. |