By John Marsett
Have you ever considered a rent to own home, or also known as a Lease Option? It may be a great alternative to just renting. Within renting a home or apartment, the you pay the landlord every month for your shelter. You end up with nothing except for the shelter that you enjoy. Whether you rent for one year or ten year, you get nothing in the end.
Most people dream of being homeowners. For those who have bad credit or cannot afford the down payment, they may think they are out of luck. Times have changed. In fact, two homes that I have bought to live in were done so with a Lease Option. In other words, a Rent To Own contract. This may be a solution that is available for you in you situation – people without a lot of money for a down payment, or with credit issues. It allowed me to put a few thousand dollars down (called consideration), make monthly payments, and in about a year, I was able to secure a and buy the home. The consideration and monthly rent credits were considered my down payment by the lender. It worked great for me - twice!
There can be a few negatives to homes for rent with option to buy that you need to be aware of. First of all, you usually purchase the home for full market value. In addition most of the money that you pay goes to rent, but a small portion can be
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transferred over to home payment (called a rent credit) if you do decide to buy it. I believe that rentals with option to buy are a better deal than normal rentals, but you need to do your homework. Some people inflate the full market value, making it more difficult to get a later.
Another thing to consider with a lease option is that you are essentially taking on the responsibility and rights of a home owner... rather than just a renter. So, if the toilet overflows, that is more your responsibility than your landlords. If it is something major like a leaky roof, then that would probably be the responsibility of the landlord. It all depends on how the contract is written. I highly suggest you have a real estate lawyer review the rent to own contract before you sign.
Each party takes on a certain risk. The rentor/buyer takes on the risk by putting a larger deposit (consideration) down. The landlord/seller takes on a risk because at the end of the contract you may choose not to excercise the option to buy and walk away. While it is a win-win situation if it is done right, it is certainly worth taking the extra time to have a lawyer involved and making sure all aspects are fair and balanced. Also check your state for any particulars with lease options. I love them, and would do them again on my next home.
John is a real estate investor and has helped many individuals get into their first home. He has helped people through lease options and finding qualified lending through mortgage brokers.
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