Exploring Rent-to-Own Properties
Rent-to-own properties, also known as “rental-purchase” properties, is a legal transaction in which a home is leased in exchange for a payment with the option to purchase the property at some point during the specified timeframe. These types of transactions are also known as purchase options or lease options. Should you consider this?
A rent-to-own property gives the potential buyer the opportunity to “test drive” the property. You can gain the full experience of living there. You get a feel for the neighborhood, the local shopping centers, and the your potential new commute to and from work. Especially if it is a town or city you are unfamiliar with but considering becoming part of, a rent-to-own property could give you the best insight before making the leap.
Rent-to-own properties are frequently tagged with higher prices than if it were simply a property for lease with no purchase option, either through separate fees or higher rental rates. Tenants rarely end up accepting the purchase option in the transaction for a variety of reasons. Also, there is no guarantee the tenant will be eligible or qualify to purchase the property at the end of the lease. If that is the case, the renter has forfeited the fees they have paid throughout their residency in helping pay off the property with no benefit to them.
Before penning that agreement on a rent-to-own property, talk to a mortgage professional or Realtor. Get professional advice on whether or not this path to homeownership is the right one for you and your financial needs.