This technique today is usually called a lease option, but many people are familiar with the model of obtaining furniture, appliances etc. through rent to own. Often, people will just call this the rent to own homes technique. As, I have said before, it is more important for the buyer and seller to fully understand what the arrangement is than what it is called.candshomes.com offers excellent info on this.
What are the benefits for a buyer to do a rent to own homes or lease option to buy homes technique?
You are able to get the house under contract for less money than if you had to come up with a down payment for a lending company. This mean getting on the road to home ownership much more quickly.
The option allows you to monitor the market over the period that you have it under contract to buy. In most markets, historically, prices have gone up. Over the last two years, this has been lessened, but some markets have still gone up. In my opinion, the upward trend will start again in the near future. No crystal ball here, just history on my side.
You may actually be able to have more principle pay down during the lease option period than you would on a conventional mortgage.
And, dependent on how you construct your contract, and whether the house is for your own residence or investment, you can create a front end payday. More on this later, when I detail my first lease option deal.
If this lease option is a deal that you purchase as an investment vehicle, you can really ramp up the return on investment (ROI) in your IRA - taking it to heights you only dreamed would happen in a stock based IRA.
Things you may want to consider before looking for homes with lease options.
If this is going to be your primary residence- can you get your finances in order by the end of the option period? If not, you could lose the home and money you have already put into it. Be clear on knowing what the seller expects and whether they will allow you to extend the option period.
Make sure that you still get some type of document, from the seller, disclosing their knowledge of any irregularities or deficiencies with the property. A home inspection might be in order.
A title check is always a good thing. It ensures that the owner is who they say they are and have represented their interests in the property accurately.
Are you willing to do your due diligence before using the lease option or rent to buy homes techniques?
Just be sure that you and the seller on the same page. A contract consisting of two documents:
- An option to purchase
- A lease agreement
I'll be going into these in more detail in the future.
So, are you getting excited yet? Are you ready to use some of these rent to buy homes techniques? I have always been willing to share this information with friends and relatives- just so I could see how big their eyes got when they realized the power of it. I hope as we go along, in future articles, I can get you to see it as well.