Rent to Own Homes – Purchasing a house where you and family member live need a big bundle of money. Rent to own house would be a good opportunity you need to take in order to having a house effortlessly.
In traditional house trading, usually people prepare amount of money and do transaction with everything needed including the certificate. The property and the title finally change hands after the transaction was done.
Bulk purchase will require much amount of money but it does not demand you in the future. However, in fact, not all people have such bulk money for paying the house that may price thousand dollars.
There are some alternatives to solve this problem including mortgage, rent to own homes or lease option. Mortgage is chosen by people as the solution for paying bulk purchase.
When you rent to own house, the process will not like this traditional house trading. The process itself is started by signing the contract of the buyers to agree to rent the house for a certain set of time before exercising an option to purchase the house itself when or before the lease expires.
This could be very helpful for everyone to own a house without down payment and qualifying a home loan.
Rent to Own Homes
- 1 Rent to Own Homes
- 1.1 What Are Rent To Own Homes?
- 1.2 Example of Rent To Own Homes
- 1.3 How Rent to Own Homes Work?
- 1.4 What Does The Contract Specify?
- 1.5 Should I Do Rent To Own Homes?
- 1.6 Benefits Of Rent To Own Homes For Buyer/ Renter
- 1.7 Benefits Of Rent To Own Homes For Seller
- 1.8 Finding Right Rent To Own Homes
- 1.9 Renting Vs Owning, Which One’s Better?
- 1.10 Few Tips About Rent To Own Homes
- 1.11 Conclusion
What Are Rent To Own Homes?
Rent to own homes is a term in which a renter sign in to the contract to pay the additional amount of money beside the basic price of rent itself. It means, the renter pay above the price basically determined for the rent price.
In the future, the additional amount of money you have paid could be the down payment to finally purchase and own the house.
Typically, the seller provides a set of time on a specific date after one until three years renting. It provides much time for the buyer for the installments to finally own the house years later.
Rent to own homes become a good idea when you really fall in love to a house but at the same time you do not have any saving to purchase it. You may feel worry of losing the house, or may be the house is purchase by the other buyers who can purchase it for cash with the better price label.
However, when property market is weak, many homeowners feel worry as if the house is not sold with the appropriate price. One of a very good solution is by renting to own house to someone who fall in love to the property offered.
This is the time for you who are looking for homes to rent to own. Homeownership could be lots easier and more effortless rather than bulk purchase or leasing.
Example of Rent To Own Homes
Do you still confuse about the term of rent to own homes? It could not be a familiar term in certain countries like in Asia, but it becomes very usual in USA. The very high price of house, at least priced $200.000, would be so hard for many people.
Many solutions are offered from leasing to rent to own house. Which one is worthy for you?
As the example, Mark falls in love to an urban house in his location. However, he does not have enough money for the down payment or qualifying leasing contract. Luckily, the landlord offers rent to own homes agreement to Mark.
Mark needs to pay $1600 each month during 36 months. The common price for a rent house is $1200, the additional cost is called as purchase credit. After the time expires, Mark have the option to buy it or not.
How Rent to Own Homes Work?
This is the essential thing you need to understand about how rent to own homes work.
In the beginning, you need to look for the ideal home and ideal environment where you are going to live there. Finding the right home is very essential because you project it to be your future home.
Meet the landlord and ask whether they will sell the house with rent to own system. Bargaining with the landlord is very important and make sure you are lucky enough meeting the kind landlord.
After the landlord agrees to sell the house with rent to own system, it is time to make the contract. Agreeing to a rent to own homes contract is done by both of you, seller and buyer.
Read the contract carefully, and do not be hesitate to propose some revisions when you feel that it is not suitable to your preference. You may need a help in this process, someone who understand a lot about leasing and financial projection, also understanding about contract and house trading.
After the contract is agreed, you need to pay the option money. The amount of option money itself may vary depending on the content of the contract itself.
The price to rent house is make up and higher than the common price people should pay for a regular renting system. And the additional cost itself is called as the option money.
As the example, you need to pay $1600 for 36 months or three years. If 25% is credited toward the purchase, so you will have rent credit for $14.400 ($1600 x 0.25= $400, $400 x 36 = $14.400).
What Does The Contract Specify?
Knowing about what you are agreeing to is very important. That’s why you will be considered as a good candidate.
To help you, you can hire a real estate attorney to explain and probably help you to negotiate the contract. It is very essential to fully understand both the legal and financial aspects of rent to own homes itself.
So what does the contract specify? There are several things must be included in the contract of rent to own homes, here there are:
- Purchase price. Purchase price is the most essential thing must be included in the contract. Specify the purchase price with its set of time. Just like the example I have mentioned previously, you need to pay for $1600 each month during 36 months or three years. It includes 25% as the credit purchased which finally be calculated in the end of the rent. The price itself could be negotiable. So, make sure you have negotiated the price with the landlord so it would fit to your financial projection. Remember that the price would be higher than the market price for renting a house because it includes option money.
- Maintenance. Depending on the term of contract itself, maintenance of house also may vary one to another. Usually, the maintenance may not be like renting. You need to make sure that maintenance term is stated in the contract. Maintaining the property, paying for repairs may be your responsibility after signing the contract. However, it is also landlord’s responsibility to association fees, taxes and insurance of homeowner, so usually the cover these costs. Regarding this term, it is better for you having renters insurance policy to cover many unexpected things may happen. You also need to make sure whether you are responsible for everything in the house, or simply just mowing the lawn. Consult it with your attorney before signing the contract, and make sure that taxes of the house are up to date.
- Buying the property. The contract also must include the term of property purchase after the lease period expires. As the example, you have rented the house for 36 months or three years, and what happen after the contract ends? There are two different terms of property purchase including Lease-option contracts and Lease-purchase contracts. Lease-option contracts provide you flexibility to purchase the house or not when you think you cannot secure the mortgage. You may decide to move to another house. However, every additional cost you have paid is forfeit. Vice versa, Lease-purchase contracts term obligates you to purchase the house after the contract ends up. So, before signing the contract, make sure you fully understand about this term.
- Term of the contract also may include personal landlord rules you need to obey. The house is still theirs so it is normal if landlord has their own rule to follow. Make sure the rule itself does not bother you.
Should I Do Rent To Own Homes?
As i’ve said previously, bulk purchase for a house is rarely done by people in this decade exceptionally if you are extra rich like a celebrity who can buy million dollars mansion.
If you want to join home loan, you need to make sure that you will qualify it and considered financially established. However, it is not as easy as you think. Moreover, you need to pay for the down payment to the developer which requires at least 10% of the price of the house itself.
Imagine if you are going to buy a $200,000 house, at least you need to have $20,000 as the down payment. Usually, some leasing require people to pay at least 10% of the total price of the home as the down payment. This amount of money is still huge for some people who does not have any saving.
Notice that when you are agreeing on a rent-to-own homes agreement, you need to pay for the option money. This option money is the additional cost besides the rent cost itself, which is non refundable.
So when you decide to leave the house and canceling to buy it, you will loose the option money you have paid for months.
You have fix earning from your salary every month and it is enough to rent a house, plus paying the option money. Rather than saving money to collect $20.000 for the down payment, it is probably better for you to rent to own homes and by time you will own the house in certain period.
This could be so helpful without making you waiting longer to have a home. Moreover, you could have living experience in your future home and would learn about characteristic of that home with its environment style.
When you ask yourself, should I do rent to own homes? It depends on you and your personal preference. Every people has their own different life principle.
Rent to own homes has so many advantages for people to own home with less effort. However, it also has several disadvantages you should notice.
Before agreeing it, it is better for you to learn all about rent to own homes, also its pros and cons. Therefore, you are avoided from any unneeded cost you pay for having a house.
Benefits Of Rent To Own Homes For Buyer/ Renter
Rent to own homes could be a interesting solution to own homes when you do not qualify leasing program.
The primary benefit for the renter is the ability to live in the future home while you make payments for the down payment. If everything goes well, renter can get to enjoy living in their new home before purchasing it.
You can negotiate with the landlord about many things such as home improvements to meets your personal taste. It is also possible to negotiate about owning a pet and other prominent degree you cannot enjoy in standard rental system.
Benefits Of Rent To Own Homes For Seller
Rent to own homes provide benefits for the seller especially when property market is slow.
It sounds very interesting because landlord or seller can sell the house with the appropriate price label, although after the lease time expires for two until three years later.
Plus, the nonrefundable option money the renter have paid to the seller could be the other benefits when they cancel purchasing the house.
However, it is not they truly want for their property.
The best thing is to sell the property at the end of the contract period. Moreover, maintenance and repairs could be something they do not need to worry about after tenant agree to do it during contract period.
Finding Right Rent To Own Homes
It is very important to find the right rent to own homes so that you can get the more benefits.
It will be an excellent chance for you getting the affordable house in your district even when you have no saving. You need to contact real estate specialist in your area to locate the best and most affordable property you want to own.
There are many real estate agents you can contact both via online and offline to help you understanding real estate market, and help you finding best property according to your personal preference.
They will help their client in finding right houses that fit to budget, location and neighborhood environment condition. You can consult to your trusted agent for getting your best rent to own homes.
You can register to real estate agent online and pay for the membership monthly or yearly. The price may vary started from $5 a month. You will get regular information about rent to own houses, sold or rented house.
Renting Vs Owning, Which One’s Better?
You may ask about the potential benefit you can enjoy about renting and buying, so, which one is better?
Depending on your financial projection and mortgage qualification, renting and buying are the same beneficial. When you do not qualify leasing and no money for down payment, rent to own homes probably a great option.
However, when you can qualify leasing and can secure mortgage, it is better to but it outright.
Here are the reasons why buying is considered better than renting to own homes.
- Buying can Build equity instead of paying rent.
- You can Access the tax benefits of the homeownership.
- Housing value appreciation you cannot get by renting homes.
- Home improvements can be done freely without bothering the landlord.
- Peaceful mind.
Few Tips About Rent To Own Homes
Purchasing home outright may feel so hard and sometime it is not a good idea. When you have decided that rent to own homes is the best solution you can do, you need to make sure few things. Before dealing to rent to own house property agreement, be sure to:
- Find the right home. It is very important to find the right home. After signing to a rent to own homes agreement, it means that you are ready to live in your future home. Do the research to the home before dealing, take a look of the property construction and its environment. Property inspection is very essential to do.
- Research the contract. Before signing to the contract, it is very important for you to understand several things, including the deadlines, the option of fee and rent payments, how the purchase price is determined, how to exercise your option to buy, be sure whether the pets are allowed or not, who is responsible for the maintenances and taxes? Those terms are very important in the content of your rent to own homes contract.
- Choose the right term. It is better for you to enter a lease-option agreement rather than a lease-purchase agreement. Lease-option agreement provides you more flexibility to deliberate whether purchasing or not when the time expires.
- Research the seller. It is also very important to heck the seller’s credit report to look for signs of his/her financial trouble. It is also important to obtain a title report to figure out how long the seller has owned it. Remember that the longer they’ve owned it and the more equity, the better.
- Get help from an attorney. You can hire a qualified real estate attorney to explain and help you about the contract. They will help you understanding your rights and obligations as the renter. When you want to negotiate some points before signing the contract, or avoid the deal if it’s not favorable enough to you, they would be a very good intermediary.
The last but not least, you need to do a consideration before dealing to a rent to own homes contract. Research about its pros and cons.
Do not waste your money on a rent to own property when you can purchase a property outright.
However, when you cannot put your money to buy a house instead, rent to own homes could be a good alternative.