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Rent To Buy Homes Begin To Secure Your Equity
f you desire to own your for sale on the open market and
own home but are unable to at a reduced price corresponding
secure conventional with whatever balance remains on
financing today, working with the home. In a typical lease
agencies or individuals who situation, the lessee has no
provide rent to buy homes may rights to the property upon the
well be your most effective and, agreements expiration. During the
in the long run, profitable rent to own process, however, the
option. A lease purchase can make down payment of a tenant is made
your rent money work for you in a as an option to, at the end of
way that renting from a landlord the lease, purchase the property
never could. and inherent the equity built up
during the tenant’s stay in the
Renting to own real estate property.
operates on very much the same
concept as does renting to own Beyond just another financing
appliances, furniture, or other option, the rent to own process
less valuable asset. A down is perfect for the prospective
payment is made and a monthly home buyer who might have trouble
payment agreed upon and taken qualifying for a loan. Many
away from the monthly balance Lease-Purchase programs allow the
until it has been fully paid, and occupancy of a home for up to 12
the property becomes entirely months prior to purchase,
owned by the payor. allowing the buyer to save for a
down payment on the same property
Rent to own is nothing more than if he or she is facing credit
a leasing option. After a certain issues which might otherwise make
period of time, the payor of a buying any home impossible.
lease is given the right to buy Normally these lenders require a
the home without it having gone 3% to 5% down payment of the
purchase price. serves as a down payment. Assume
your budget allows for $6,000 for
On the other hand, any who take Option Consideration. This
advantage of the rent to own equates to approximately 2.8%
process find it worthwhile if for ($6,000/215,000). You will also
no other reason than the peace of need $1,500 for the first months
mind achieved. Tenants have full rent for a total initial payment
control of the home and can of $7,500.
maintain it or improve because it
will be yours when they exercise It’s important to know that
their option to buy. option consideration is not a
security deposit. It is a non
Consider the following example to refundable payment toward the
illustrate the process: purchase price and is 100%
credited toward reducing the
A nice 3 bedroom, 1 bath single price of the home.
family home located in a near
west suburb of Chicago in a great Now suppose you paid all your
neighborhood with good schools monthly rent payments on or
and a strong community is before the due date and you
available for sale. It has been choose to buy the rent to own
freshly painted, cleaned, and is home at the end of the 12 month
ready to move in. The purchase lease purchase contract. You will
price will be $215,000. Monthly have $15,000 in equity before you
rent payments will be $1,500 and even own the home, an advantage a
you as the buyer and tenant will buyer who purchased the home
receive a 50% rent credit ($750 outright or with a mortgage taken
per month). You would need from a bank would not have at
between 2.5% and 7% in up front their disposal.
Option Consideration, or what
You started with $6,000 and by above, this can cost more than
paying your rent on time; your the rent credit. Since realtors
equity position grew 150% are completely eliminated in this
(another $9,000) for a total of transaction, there is no
$15,000 with 12 months. Not a bad commission and this savings is
deal considering many find it allowed to be passed onto the
nearly impossible to save $9,000 leaser. This provides still
in a year with all the costs of another advantage to renting to
living constantly on the rise. own as opposed to what are
considered to be the more
Those who provide rent to own mainstream ways to purchase a
services to buyers do so in an home.
attempt to build a business by
creating value that doesn’t Finally, when the tenant decides
currently today. They can only to purchase the home after
accomplish this through quality renting it for some time and
referrals from tenant buyers, becomes the tenant buyer by
sellers, and landlords. Giving taking advantage of the rent to
back rent credit helps a family own process, there is an
to buy a home more quickly than immediate sense of pride in
they could trying to save 10% or ownership. Tenant buyers add
20% to put down on a new home value to the community and take
purchase, allowing them a head care of their future property to
start toward building equity. a far greater extent than those
who simply rent, making
Additionally, when a home is sold improvements, and generally feel
through a realty service a good knowing their rent money is
commission of anywhere between 5% working for them (reducing the
to 7% is typically paid as a form purchase price) rather than just
of commission. In the example making money for their landlord.
while others don’t have any
Most everyone has dreamed of savings for a down payment.
owning their own home at one Whatever your situation, the rent
point or another. Many people are to own process can make one of
unable to qualify right now to the most difficult and important
buy their home because of many decisions of your life an easy
factors. Some people have a few and even profitable one.
bumps in their credit score,
About the Author:
Gary Carraghan is a successful author and regular contributor to http://www.super-mortgages.com who provides money-saving tips on mortgages. More information on similar topics can be found at http://www.super-mortgages.com/Rent-to-Own-Home.html . WEBMASTERS: Above hyperlinks must be kept intact.
Read more articles by: Gary Carraghan
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