Renting is the most common mode of living. Ownership is one of the major goals of a rent payer, rent to own is an affordable housing solution that has future benefit and also satisfies property demand. This financial option offers a flexible payment plan for buyers who do not have access to up front money.
The option tends to benefit the potential buyer in terms of financial options After the down payment has been made. As a buyer you will have the financial option to clear the other portion as stated in the contract through monthly installment.
Renting to own is advised because it’s able to get the buyer to invest in the property without having to pay the full amount required, therefore making the buyer more invested in rent to own. As monthly payments are made the money off-sets your final fee therefore building and establishing equity.
Here’s a rundown of what to watch for and how the rent-to-own process works. It’s more complicated than renting, and you’ll need to take extra precautions to protect your interests. Doing so will help you figure out whether the deal is a good choice if you’re looking to buy a home.
Depending on the terms of the contract, you may be responsible for maintaining the property and paying for repairs. Usually, this is the landlord’s responsibility, so read the fine print of your contract carefully. Because sellers are ultimately responsible for any homeowner association fees, taxes, and insurance (it’s still their house, after all), they typically choose to cover these costs.
Before You Sign the Contract
So what steps should you take when you’re considering a rent-to-own property? Be sure to:
Choose the Right Terms
Enter a lease-option agreement rather than a lease-purchase agreement.
Hire a qualified real estate attorney to explain the contract and help you understand your rights and obligations. You may want to negotiate some points before signing or avoid the deal if it’s not favorable enough to you.
Research the Contract
It is advisable to get an attorney who understands the situation at hand to go through the fine print, go through your contract and come up with a solution before you lose the property or sign a contract that will not be in your interest
Make sure you understand:
- The deadlines (what is due when)
- The option fee and rent payments–and how much of each applies toward the purchase price
- How the purchase price is determined
- How to exercise your option to buy (for example, the seller may require you to provide advance notice in writing of your intent to buy)
- Whether pets are allowed
- Who is responsible for maintenance, homeowner association dues, property taxes, and the like
- What “maintenance” means: just mowing the lawn and raking, etc. or serious repairs, such as fixing a roof.
Research the Home
It’ll be best if you order an independent appraisal, obtain a property inspection, make sure the property taxes are up to date, and ensure there are no liens on the property. Before renting the property you should be able to visit the site physically.
Research the Seller
Check the seller’s credit report to look for signs of financial trouble and obtain a title report to see how long the seller has owned the property—the longer they’ve owned it and the more equity, the better.