Renting to own may be a lot better than just renting, maybe! There are both pros and cons to renting to own. A lot of people mistakenly believe that when you rent to own ALL the rent that you pay goes towards owning the home.
The reality is a little different. Typically rent to own deals have time limits on them and only a small percentage of what you are paying goes towards the purchase price of the home. There are other draw backs in a rent to own situation that are discussed under the “con” heading below.
As with all real estate transactions it is always best to get the advice of an attorney if you are planning on making your rental agreement a rent to own agreement just to insure that you are protected legally.
Before you make your decision take a look at both sides of this opportunity before you sign on the dotted line.
1. Rent to own homes are a great deal for the seller. They can also be a great deal for the buyer IF the buyer is ready to purchase in the allotted amount of time. The Pros of rent to own include having time to get ready to buy.
2. In many successful cases of rent to own the purchaser simply needed time to get their finances in order and to get their credit back in line with someone that can get a mortgage. The process of rent to own sort of reserves the tenants right to buy the house.
3. In rent to own situations typically the monthly payment is broken into two separate parts. One part is the actual rental fee and the other part goes towards the purchase price of the home. In this respect rent to own is a pro!
4. Even if a small portion of your monthly rent is put toward the purchase price of the house you are still at least paying for something besides the owners mortgage. Depending on the agreement even a small percentage can make a difference in the purchase price of the house.
5. One of the other pros is also financial. Perhaps you are not in a great position right now but your financial picture will be changing soon and you find a house that you really love. A rent to own situation may be the ideal situation because you will be able to lock in on a purchase that may go up over the years that you are in your renting portion of the lease BUT that you have secured with the agreement.
1. Well if you are thinking that maybe this might be a plan that works for you, consider the following con’s. When you rent to own be sure that you can fulfill your end of the deal. That means if you are under agreement to purchase the home in 2 years be sure that you are going to be able to do that IF you do not all that money that was going toward the purchase price of the home now becomes the property of the homeowner.
2. Also consider that most rent to own agreements leave repairs to the purchaser. Of course there can be some language written into the agreement that states if the repairs are over a certain dollar value than they become the homeowners responsibility but in most cases that language is omitted.
3. Another con is that it can be very hard to get out of the deal, in other words if you live in the home under the two year agreement and you are not ready to close on the property shortly after the two years than you can be in a world of hurt. You will lose all the money you put into the payment each month and you can be asked to leave the property.
4. The moral of the story BE CERTAIN, be certain this is the home you want, be certain that you will be able to get the money and your credit together. If you are not you stand to lose a great deal of money and may have to start looking for a new place to live.
5. In some cases if the home is having serious issues like major roof issues, or foundation issues you may be able to get out of the agreement AND get your money back that was to be put toward the down payment but largely if the property owner has upheld their end of the bargain than you will be expected to do the same.
To avoid the pitfalls of rent to own be sure that you read the agreement completely or have an attorney review it and explain it to you so that you can go in with your eyes wide open.