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Facts About Rent to Own Home Options

Sep 13, 2008
Renting to own property is not all that different to a rent to own car policy. Renting to own a car is simple - the customer rents the vehicle for a certain time period and they can then decide to purchase the car at the end of the lease period. With property, rent to own works in a similar way, just on a larger scale.

Renting to own gives interested buyers a chance to 'try out' a home before buying it. By living in the home as a renter the tenant can put off major financial commitment until further into the future.

The rent to own policy is becoming more popular. It gives future buyers a chance to get a feel for the neighborhood before moving in. first time owners in particular are flocking to rent to own opportunities. This is because saving the large lump sum of cash for a down payment on a house purchase is difficult especially compared with the relatively small down payment required on a rent to own property.

Both buyer and seller benefit from rent to own. These quick facts will help you understand rent to own to decide whether it is right for you:

* The property price and the rent amount are both determined by market values however buyers can still negotiate, which is why it pays to do your research before going property hunting.

* If you are a buyer then try and negotiate a longer option period in order to provide time for the buyer to repair any bad credit records and save money for their property purchase. Sellers will usually want a shorter option period so that the house can be sold as soon as possible.

* Rent to own can be more profitable for sellers compared with a cash sale as more money can be made from the property before it is sold.

* If the buyer chooses not to buy the house at the end of the lease period, the seller pockets all the rent payments plus the option fee. Additionally the seller may receive tax benefits on the mortgage interest during the option period.

* The lease period us usually from one to three years, depending on buyer and seller agreement.

* In most cases the property can not be sold to another buy while the rent to own tenant is under contract.

Let's look at an example: you decide to put one of your rental properties up for sale on a rent to own basis. You find a tenant/buyer who's very interested in owning the house for himself and his young family, but has had a hard time securing a mortgage with the bank. The rent to own program works well for him as he's building his credit while he gets to live in the house he wants. He puts down $3000 on a house with an option to purchase the house for $150,000 at the end of a two year lease. You also agree to apply 10% of the monthly rent of $1200 to the purchase price.

Rent to own is a great policy that has benefits for both buyers and sellers.
About the Author
Adem runs the real estate investing site ProfitPiggy.com where you can find detailed examples of the most popular real estate investing methods, real estate investing articles, courses, and more. Visit ProfitPiggy.com now to get started!
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