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