Rent to own is a relatively small, but growing, segment of
the real estate market. In a tight credit market or a downturn
in value situation, the rent to own approach tends to increase
in popularity. A significant concern, however, is the fact that
the concept is widely misunderstood.
Many people have entered into a rent to own transaction without
sufficient understanding or knowledge, and they have had a negative
experience. Don't let this happen to you. Get the knowledge and
understanding you need before you try to do a rent to own deal.
The following ten tips are intended to give a potential lessee/buyer
something to think about, and they only scratch the surface.
- First and foremost, understand the rent to own concept. While
it is simply a lease agreement which contains an option to buy,
the traps lie in the details. For an example of a rent to own
home transaction, see Rent To Own Homes Explained.
- Be realistic and honest with yourself. Why are you unable
to purchase a home today? What will be different by the time
the option period expires? If you can't be confident about your
ability to exercise the option prior to its expiration, don't
do the deal. You don't want to forfeit your purchase credit money.
- Be specific with all cost items including the option price
(sale price) of the home, the monthly lease amount and the rent
- Time is your friend. Negotiate for as long a lease/option
period as possible. The typical option period is one year, but
why not negotiate for a two or three year period? Your option
agreement should allow you to exercise it at any time during
the term. Be creative. Maybe the other side will agree to a longer
term if you agree to increase your monthly payments after each
year. Also, try to get a right to renew the lease/option agreement
in the event you are unable to exercise the option.
- Protect your option consideration money. Ask the lessor/seller
to place it in a third party escrow account. Try to get the other
side to place your rent credits in the escrow account. Be creative
because the lessor/seller will probably object to this request
since it might severely hamper his/her cash flow requirements.
Maybe a HELOC could be used to fund this part of the transaction.
- Be specific about your maintenance responsibilities. While
it is customary to be responsible for upkeep and minor repairs,
make sure you are not responsible for major repairs. Spell it
out, and put a dollar limit on your obligations. Put a penalty
clause in your contract if the other side fails to meet his/her
obligation within a reasonable amount of time.
- Record your rent to own contract with the county. You want
it to get into the chain of title. Also, you should also request
copies of monthly statements proving the lessor/seller is making
his/her mortgage payments. In addition request proof of payment
for property taxes and insurance.
- Hire a real estate attorney who has experience with rent
to own contracts. Unless you are competent with local real estate
laws and the rent to own concept, do not try this type of transaction
on your own.
- Hire a home inspector. While you are not buying the house
at the present time, you are making a substantial commitment
with your option consideration money and monthly rent credits.
So make sure your investment is worthwhile.
- Follow the terms and conditions of your contract. Do not
allow yourself to forfeit your side of the agreement. You negotiated
the deal, so you better understand and follow it. If you feel
the process is too confusing or too much of a headache, keep
renting until you can get a traditional mortgage loan.
Ready to find your rent to own home?
homes for lease and sale section in your state. You may find
a seller or landlord who has exactly what you're looking to find.
If so, great! You're more than half way there. You can contact
the Seller/Landlord directly, and work out a deal.
The next obvious step is to check other websites and your
In addition to searching for a rent to own home, why not take
advantage of JSC's free home wanted listing service? Let sellers/
lessors find you! Do it now: click here.
Congratulations, you just took an important first step and
placed your free property wanted listing, but now what else should
you do to find that perfect rent-to-own home?
Take advantage of social networking. Networks like Facebook,
Twitter and Google Plus are becoming more important every day,
and it is a great way to spread the word.