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Answers (14)
- Steve Samyn, "Steve55193789"
- Contributions:42
Rent to own has the optionee (aka renter) taking on risks(known and unknown) that are not necessary to take. Unless we are in a period of rising home prices I dont see the benefit to the optionee of taking the risks. I have gotten calls from home buyers over the years that have had bad experiences. Real estate investors/house flippers love these for good reasons. One should get informed on the full legal ramifications of these instruments before getting involved with them. Enough said.
- Kyle Baird, "Kyle Baird"
- Contributions:72
As the other advisors mentioned, it can be tricky as you are relying on the seller and your future financing to behave predictably. To add to the previous list of what ifs: what if the home appreciates and the seller reneges?
Another possibility is to just ask the landlord if they would be interested in selling when you are ready... and then simply negotiate at that point. Or negotiate a low option payment that you could walk away from without hard feelings if it didn't work out.
Also, if you are serious about the home or are putting down a non-trivial option payment, hire an attorney experienced in these deals to set up the deal to help offset some of the risks.
Overall, only rent to own if you *love* the house and feel a strong desire to own it. If it is just an intellectual decision like you don't want to throw away money on renting, then don't bother. Just focus on the many positive aspects of renting and call it good.
Good luck!
Another possibility is to just ask the landlord if they would be interested in selling when you are ready... and then simply negotiate at that point. Or negotiate a low option payment that you could walk away from without hard feelings if it didn't work out.
Also, if you are serious about the home or are putting down a non-trivial option payment, hire an attorney experienced in these deals to set up the deal to help offset some of the risks.
Overall, only rent to own if you *love* the house and feel a strong desire to own it. If it is just an intellectual decision like you don't want to throw away money on renting, then don't bother. Just focus on the many positive aspects of renting and call it good.
Good luck!
- Geri Kenyon, "Kenyon Real Estate"
- Contributions:134
Ren to own is beneficial to the seller not to the buyer. Begin a relationship with a Realtor for personal counseling...
wow the clueless advising the lost!
1.what if the owner defaults to his bank? the home gets foreclosed and your deal is ended.
2. What if the owner owes more than the current value of the home? you will never be able to buy it at the end of the rent to own period.
3. What if the value drops? you won't be able to get an appraisal sufficient to buy it, and you may not want to buy it anyways.
4. what if your credit / job history never gets enough better to buy? after all, with interest rates at near record lows, those would be the only reasons to simply not get a loan today.
5. what if rates go up? will you still want to buy?
In short, rent to own is almost always the worst idea possible. It is where clueless poor credit buyers meet unrealistic sellers, and think they have made a deal. usually it ends poorly, often in lawsuits.
Nevertheless clueless agents keep recommending it. go figure.
1.what if the owner defaults to his bank? the home gets foreclosed and your deal is ended.
2. What if the owner owes more than the current value of the home? you will never be able to buy it at the end of the rent to own period.
3. What if the value drops? you won't be able to get an appraisal sufficient to buy it, and you may not want to buy it anyways.
4. what if your credit / job history never gets enough better to buy? after all, with interest rates at near record lows, those would be the only reasons to simply not get a loan today.
5. what if rates go up? will you still want to buy?
In short, rent to own is almost always the worst idea possible. It is where clueless poor credit buyers meet unrealistic sellers, and think they have made a deal. usually it ends poorly, often in lawsuits.
Nevertheless clueless agents keep recommending it. go figure.
In this economic climate, it is a very good option. Assuming the owner-financing terms are favorable, you get so much more return for your money. Just make sure that you definitely want to live there!
- David Akram, "David Akram"
- Contributions:83
It is a good option is you are absolutely sure you will be buying the property because usually the owner/seller will ask for a large upfront non-refundable deposit in the event you decide not to buy later which of course you will lose when you walk away.
- Rudi Hofmann, "LUXURY HOME LOANS CA"
- Contributions:7435
Renting is a good option, at least until you are in a position to own. Rent / lease to own can become very treacherous waters to thread.
Happy funding, Rudi
Happy funding, Rudi
- Dean Bright, "Dean Bright"
- Contributions:123
Good questions and many good answers below. The reason most folks need to do a lease purchase is bc of their credit. Have to be aware many owners will charge a higher interest rate. Also, many times they will want more non-refundable money down up front. This is in case you do not proceed with the purchase, and the owner has to put in new flooring, paint and/or make repairs. Hope the best for you. Best Regards.
Dean Bright
ReMax Associates Athens
Athens, GA
Dean Bright
ReMax Associates Athens
Athens, GA
- Deborah Garvin, "loanmonarch"
- Contributions:438
It is only a good option if you are absolutely certain of the outcome on your exit strategy (i.e. obtaining traditional financing). Consult with a mortgage professional on how to structure the transaction BEFORE you enter into it. 99.9% of the time the lease purchase contract is written so there is no benefit for the buyer in terms of getting subsequent financing.
And, most of the time it has nothing to do with the seller trying to take advantage of the buyer as much as the fact the lending guidelines are pretty restrictive on what they will accept as down payment. Jim's example is pretty good, but take it a step further: If the seller agrees to allow 100% of your rent payment of $1000 towards the down payment, but the fair market rent is only $900...the net result is (from a lending perspective) you have made NO down payment no matter how long you live in the home.
And, most of the time it has nothing to do with the seller trying to take advantage of the buyer as much as the fact the lending guidelines are pretty restrictive on what they will accept as down payment. Jim's example is pretty good, but take it a step further: If the seller agrees to allow 100% of your rent payment of $1000 towards the down payment, but the fair market rent is only $900...the net result is (from a lending perspective) you have made NO down payment no matter how long you live in the home.
- Scott Berglund, "pvhomes"
- Contributions:491
It is an excellent option if you can find a seller willing to cooperate.
- Darrell Self, "Darrell Self"
- Contributions:349
In general with the rent to own option you will most likely pay more than if you work on your credit to get yourself to qualify for a traditional mortgage. The owner of the home willing to do a rent to own is charging you a hefty premium to do so in most cases. That being said rent to own is a great deal for the owner of the property and you have to review the terms of the rent to own contract with a real estate attorney.
Depends on the terms. Usually, it is more benifical to a renter that could not afford/qualify for a home currently. But have circumstances that will change that in the future.
I tend to be skeptical of anything complex.
- Jim Windmiller, "Windmiller Group"
- Contributions:88
It totally depends on the terms that are offered. Most sellers who do this will apply very little of your rent payment to the down payment on the home when you do eventually buy. For instance, on a $1000 a month rent payment, a seller may offer to credit $50 towards the purchase of the home. If you have rented for a year, then you have a total of $600 towards your down payment - which isn't much considering you have given them $12,000 over the course of the year. Also you usually negotiate the price of the home up front, and if the value drops by the time you are ready to close - you are stuck with an over priced home. If the seller is offering good terms - like applying 1/2 of you monthly payment towards the purchase - I don't see anything wrong with it - as long as you really love the house and are not just "settling" for the only home that offers a Rent-to-Own option.
- Bballandgolffan
- Contributions:2
I have been renting an apt for the past 4 years while in college. I have student loan debt and not that high of a salary. I hate the thought of spending 660 a month of rent for a lot more years. Is rent to own a good option?
Is rent to own a good option?
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