Is Rent-to-Own Real? Is It Worth It?

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Is Rent-to-Own Real?

If you’re asking Is rent-to-own real? and mean just that, the answer is yes. If you mean, is it a good idea for you, the answer is maybe.

In this article, I will go briefly over what rent-to-own houses means; then I’ll go into the pros and cons of renting-to-own houses.

Full disclosure: I’m about to show you two easy ways to make money with money. To keep the lights on at Home Loan Mine, many of the links in this blog post are affiliate links. If you register with the websites, through my links, websites that I’ve vetted this week, I’ll earn a small commission each time. If I’m lucky, I’ll earn enough money for lights AND a medium decaf Americano from the Starbucks across the street from my office.

Rent-to-Own Homes Websites?

How Does Rent-to-Own Houses Work?

  1. You find a house whose owner is open to the idea of selling it to you at some time in the future and willing to let you rent it until then.
  2. You decide whether you are sure you want to buy it or if you’d merely like to have the option to buy it.
  3. You and the owner agree on rent amount, the length of the rental term, the price at which you’ll buy the house (the price will be higher than current price because the owner’s thinking prices in the future are going to be higher than the current ones), the upfront fee you will pay and who’s responsible for what (in terms of repairs and bills to pay).
  4. You (or the owner) draw a a lease and a purchase contract.
  5. You and the owner sign the lease and the contract.

Full disclosure: When you register at this site, I earn an affiliate commission, paid through Max Bounty. I spent five days looking for and vetting offers, however, I consider this one to be a solid offer.

If you’re ready to find rent-to-own homes and you want to do it online, RentToOwnListings has listings of houses, condos and townhouses that are rent-to-own properties.

That was the simplified version. The more complicated version has the same steps but takes into account that it’s a smart idea

  1. to see what you need to do to be able to qualify for a mortgage when the time to buy comes,
  2. to have a home inspector take a look at the house,
  3. to hire an appraiser to give you the current and future value of the house,
  4. to hire a real estate attorney to help you with the contract,
  5. to have a real estate represent you,
  6. to have a plan in place for saving the costs of getting the loan and down-payment (if you’re not building enough through the monthly rental payments) .

Rent with the Option to Buy vs Rent and Buy Agreements

Since there are two ways to go about it, there are two types of agreements and you must be careful as to which one you choose.

  1. A rent with the option to buy agreement basically states that you are renting a house for a certain period and that you can, if you so desire, buy that house before that period at a price set when you signed the lease. You are basically preventing the owner from selling the house to someone else while your agreement is in force.
  2. A rent and buy agreement basically states that you’re going to rent a house and that, at the end of the rental term, you have to buy the house. You are basically binding yourself to buy a house in the future.

The Pros and Cons of Rent-to-Own Houses

The pros of renting a house with the option to buy it are few; the cons are many. In general, in other words, there are better ways of becoming a home owner.

The Pros of Rent-to-Own Houses

  1. You don’t have to pay a big down payment. (If you’ve drawn up the proper contract, part of your rent is applied towards your future down payment. Which means you better be ready for your rent to be higher than typical rents, because it will be.)
  2. You are guaranteed the house, which is sweet if property values go up to or beyond your agreed-upon price.
  3. You have to qualify for a mortgage in the future, not now. You get time to work on your credit, you get time to find a better-paying job, or pay off debit.
  4. Property values may go up beyond the price you agreed to buy at.

The Cons of Rent-to-Own Houses

is rent to own real?
  1. Your have to pay an upfront, non-refundable fee for the option to buy in the future.
  2. Your rent is more expensive with rent-to-own houses.
  3. Property values go down. Usually, not a great risk if the rent term is short, but it has happened. Two and three-year rent-to-own situation carry a bigger risk.
  4. You’ll have some of the ownership expenses. (Home owners who sign rent-with-option-to-buy contracts will pass some of the costs of home ownership to you: repairs, cutting the grass, maybe property taxes.) Any and all repairs you pay for remain your expense even if you end up not buying the house.
  5. You do not control the future. It might not make sense for you to buy that house or to buy any house at the term of the rental period of your agreement. In that case, the upfront fee you paid and the part of your rental payments that is above typical are lost money.
  6. The landlord’s financial situation deteriorates to the point where they let the house go into foreclosure. When the bank takes back the house, it is not bound by your rent with the option to buy / rent and buy agreement.
  7. The seller chooses not to sell to you forcing you to go to court to enforce the contract. Even if you win, it’s costly and a hassle. I wrote if because people have been known to give up in the middle of the court battle even though they were going to win, eventually. And, of course, your contract might have loopholes that favor the landlord in such a situation.
  8. The contract works in favor of the seller and against you. It is very easy for the option-to-buy part of the agreement to become legally void. Paying rent one day late can do it.
  9. Mortgage rates get higher than you anticipated.

Is Rent-to-Own Real and Is It for You?

So, rent-to-own is real. Whether it is for you, it’s up to you to decide. It is a method of buying a house that has worked for many before without head aches. It has worked for some with head aches. And for some it has not worked.

The different outcomes have to do with the buyer, the seller and with the type of deal / contract this is. Me, I’ve never bought a house this way and I think I’ve done the right thing by not doing it. I have a big problem with being bound to take a particular actions months in the future when I cannot read the future.

Where Can I Find Rent-to-Own Properties?

If your situation is such that the pros outweigh the cons of renting-to-own, the next question is Where can I find rent-to-own properties?

There are not many way. Here they are, in no particular order:

  1. rent-to-own websites
  2. word-of-mouth
  3. real estate agents who specialize in rent-to-own transactions
  4. social media
  5. general real estate websites.

Full disclosure: When you register at this site, I earn an affiliate commission, paid through Max Bounty. I spent five days looking for and vetting offers, however, I consider this one to be a solid offer.

If you’re ready to find rent-to-own homes and you want to do it online, RentToOwnListings has listings of houses, condos and townhouses that are rent-to-own properties.

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