Owning a home is not a vastly complex process but for those who lack the right experience and tools it can be very confusing and overwhelming. With any real estate transaction there are many variables to consider when deciding on renting a home, buying a home, or going the rent to own route. In this article we will be going over how you can decide for you and your family whether or not rent to own is a good fit for you.
Perfect Rent to Own Scenarios
- Just moved into an area and need time to get settled before you get a loan
- You need a 6-24 month time span to clean up your credit score so that you can get a loan
- You need time to finish saving for a down payment
- You would like to check out an area before you commit to buying
- You are self-employed and are having trouble getting a home loan
- You are a first time buyer having trouble establishing credit to get a loan but are making more than enough money to own
- You are pre-approved for a loan but would like to wait for a lower interest rate while trying to increase your credit score
Rent to Own May Not Be For You If
- You are not on a program or schedule to alleviate debt, fix your credit or save money for a down payment
- You are looking for a quick fix and haven’t done you’re homework on the process
- It is unrealistic for you to be able to purchase the home after the lease period (wish and a prayer technique)
- You are uncomfortable asking tough questions and negotiating with the seller
- You are unsure if you will need to relocate within a couple of years
If you notice that you’re situation includes one or more of the reasons above than rent to own may not be right for you. We urge you to be extremely careful because you could end up losing a lot of time money and effort and still not own a home. On the other hand if you have a great reason for using a rent to own strategy we are excited for you and give our seal of approval to start looking for a great rent to own deal!
How Rent To Own Works?
Rent to own takes place most of the time in one of three scenarios. The first is that a vacant, foreclosed, or dilapidated home is bought by an investor who fixes up and sells the home via rent to own to quickly turn the property. The next scenario is where a developer builds a series of homes or condos for luxury or in impoverished areas using rent to own to entice buyers. The final scenario is when a single home owner has trouble selling their home and decides to use this method to sell.
When we look at the first scenario you might think, so what an investor made a buck off of flipping a house how does that benefit anyone but the investor and the buyer? Well, when a neighborhood has a home that is run down, vacant or foreclosed it can lower home prices nearby as well as attract crime, squatting and drug use. The incentive of that the quick turn around rent to own provides for the investor can improve home prices for everyone in the area as well as prevent many problems.
Although a developer building rent to own luxury homes or condos can some what drive up the surrounding home prices it doesn’t have quite the overall community building affect that takes place when they build a development in an impoverished area.
It’s always a frustrating story when a seller can’t find the right offer for their home and desperately wants or needs to move. Many times in this situation home either remains vacant or is run through a series of tenants. While we discussed the issues with a vacant home above, a home with bad tenants can be just as bad. Tenants tend to not take as good of care of the home and if evicted even due damage to the property purposefully. In a rent to own situation the person renting intends to buy the house and is more likely to make friends with neighbors and take good care of the home.
Regardless of the scenario rent to own homes can provide serious benefits to the community and in some cases helping it actually flourish.