Benefits to Buying Rent to Own Properties

Foreclosures, Short Sales, Tax Foreclosures
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"Rent to own properties can be a great way to purchase a home without using the traditional methods of mortgages and bank loans. Unlike a standard home purchase, in a rent to own transaction the seller and buyer agree on a possible sale at some time in the future. There’s no guarantee of purchase, but the renter’s payments are usually used to reduce the overall cost of the purchase, should they chose to buy the home. There are significant benefits to buyers who use this method to purchase a home, in addition to the standard benefits of home ownership like tax deductions and financial security.

How it Works:

As a buyer, you will agree to certain terms with the seller, and sign a contract. A lease option premium will grant the buyer the right to purchase the home in the future. While these payments don’t require a purchase, they are usually not refundable. However, if the buyer does choose to purchase the home, the premium can be applied to the purchase price. The purchase price is decided upon by the buyer and seller, and is set in the contract, granting the renter the option to purchase the home at that price regardless of current market value at the time of sale. Finally, the buyer/renter makes monthly payments to the seller, of which a portion is applied to the final cost of the home, reducing the amount the buyer would have to finance.

Benefits to Buyers:

A lease purchase transaction can be appealing to a wide variety of buyers, not just those with bad credit. Coming up with a large down payment to purchase a home can be difficult, and renting to own bridges the gap between owning and renting. As a buyer, your monthly rent payments actually go toward a future investment. Additional benefits include:

Grow your equity. A portion of rent payments are actually applied to the purchase of the home, which will eventually be yours should you chose to buy. This a great way to grow your equity by funding a future investment.

Minimum out of pocket expenses. Usually, a home is purchased with 3.5% of the price down, and you have to account for closing costs as well. With a rent to own purchase, you are only responsible for the normal rental security deposit with a small option premium.
Flexible terms. Many rent to own contracts offer negotiable terms for buyers. Sellers are often open to those with bad credit, because you make monthly payments that establish your ability to purchase.
Get to know the home. These agreements allow you to learn the ins and outs of your home before purchasing. Unlike traditional agreements, you have a change to actually live in your future home before you actually own it.

Lock in the purchase price. Rent to own properties give you the ability to decide on a purchase price in advance, regardless of how the market changes.
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This is a great option for buyers that have poor credit, have recently gone through a foreclosure or a short sale or that would like to get into the real estate market and “save” for a down payment. The only problem here is that if the buyer/tenant does not fulfill the purchase end of the contract, all payments toward the purchase are lost.

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Staging includes both the inside and the outside of your home, and includes organizing, de-cluttering, cleaning, and decorating appropriately. When staging your home for a showing, you should make a checklist of all the areas you think need the most attention.

You should be willing to put a little time and effort into staging, but be aware of spending too much. Essentially, you want to put in as little as possible, so you can have a higher return when he home sells. Also, remember that staging is not about doing major repairs or improvements, but instead is a way to increase the way your home looks.
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Well its a great idea and thanks for your informative post. There is lots of benefits for renting a own Properties, its a good investment also its great technique for improve your credit score as well.

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There is no doubt that rental properties are the best way to build fast and secure wealth, but making the first investment or finding a good deal is not that easy. Here are some points every rental property buyers need to keep in mind

Know your needs

Do proper planning and set criteria

Arrange financing

Search the property

Make your offer

Do your due diligence

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Here’s an example of why you should be careful who you listen to.

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There is only one thing that put me on doubt… Make sure that the buyer is fulfilling his/her obligations to pay the payment to the developer. I have a cousin having a bad experience with it.

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Bit confusing to me…seems lke comparing apples and oranges.

Rent to own…gets NO ownership at all until contract is fulfilled.

Lease Option…gets option/right to purchase inder certain conditions.

Please clarify which you are speaking of.

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Hi,
Informative post. There are a lot of benefits to buying rent to own properties:-
Help to improve credit scores
Long term investment
A way to earn income on a property
The potential for a higher sales price
Thanks!!

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Rent to own can be attractive to buyers, especially for those who can’t meet the requirements for a home loan. Over time, they can start building their credit scores until they may able to get a home loan. Also, rent to own is just like test driving a car. You can live the house before committing to buy it. This will help you find out the hidden problems of the property and the neighborhood. :rolleyes

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Well, rent-to-own homes is a good idea, but make it sure the contract specifies what happens if home values rise or fall between the time the agreement is signed and you go to settlement.