Rent to own is really a (here's my big word for the year!) misnomer: applying a wrong name to a person or thing. Rent to own implies that you rent for a period of time and then you own the home. But that's not what happens - renting to own a home is a lease that gives you the option to buy the home within a certain amount of time. Because people do not understand how a lease option works - they enter into these agreements with a lot of misinformation, find out it wasn't love at first signing and sadly lose money.
Three big things about lease options:
The down payment money and the amount of money agreed to be applied toward the purchase DOES NOT get refunded to the lessee (renter-tenant) if the home is not purchased.
Once you enter into a lease option - you no longer have a landlord - you are responsible for the home - all repairs including major ones - you essentially become a home owner.
To have a valid, enforceable lease option- you need to be qualifed with a lender to buy the home, give down payment money (which you will lose if you do not buy the home) with all monies deposited in an escrow account until the lease ends. If you are doing a lease option any other way - or with a do-it-yourself landlord - well, good luck.
When should you love lease options?
If you are tired of renting and want to buy a home, but your credit, income situation or other factors prevent you from getting a loan.
If you found the home of your dreams, but you need time to fix your credit before you can buy it.
When should you not love lease options?
- If you don't have the discipline or desire to change your financial habits to save money or fix your credit.
- If it's not the home of your dreams, you are not sure that this is the right home for you or if it's just a stepping stone home.
- If you think you might move to another town or state at some point.
- If you don't have a steady income. Your mortgage will not be approved at the end of the lease option without a stable income source
You love them, you love them not ... you love them, you love them not .... whichever petal you end up with - make sure it's right for you!
This blog is written with my opinions and my opinions are presented with accuracy but not guarantees. Please talk to a professional before making any real estate, financial or agency decisions. Gabrielle Kamahele Rhind - 2014. If you want to reprint parts of this - just email me for my permission: KGCProperties@gmail.com .