Rent To Own Home Ideas

Rent To Own Home Ideas

Rent-to-own deals have an unseemly image. But they can actually prove useful in today’s troubled housing market, allowing buyers and sellers to lock in deals until conditions improve.

Consider, for example, a buyer who has to move for a new job but can’t buy a new home until the old one sells, or the buyer who needs a little time to repair his credit or wait for his spouse to land a job. With a rent-to-own deal, also called a lease-purchase agreement, any of these buyers could nail down a dream home that’s available today. That can take the sting out of renting.

Sellers can benefit as well. Instead of leaving a home empty, the owner can bring in a tenant to cover expenses, something that can be hard to do if a home is up for sale. The owner thus doesn’t have to give in and sell while prices are down and buyers are scarce.

Still, a rent-to-own is not to be taken lightly. Both parties are gambling on future conditions such as home prices and mortgage rates, and their bets could backfire.
While all lease-purchase agreements are negotiable, they tend to follow a basic blueprint: Seller and buyer agree on a sale price for the property, with the buyer given a specific period to exercise the purchase option, typically one to three years.

For more tips on buying, selling or renting a home, check out Freedom Rent to Own Blog Page!

The Need for Rent to Own Homes

A Rent-to-Own option in real estate is also know as a purchase option. This option is allows the person renting or leasing a property to have the option to buy it at some point during or after the term in a lease agreement.

While there are a variety of ways to create a lease, lease to own programs are limited in many US housing markets. Many offer risks to future buyers. In an article by the Wall Street Journal, they say, "For investors, it is a chance to profit off the recovering housing market". "Consumers get a chance to lock in a home before they have the money together for a down payment".

In fact, every month over 180,000 Google searches happen around just 5 search term variations about lease to own homes. That’s over 2 million searches a year for this opportunity.

Many want to own again in the future, and find it frustrating to rent a home without any option to buy it. When they are ready to buy, they need to move again.

A Rent to Own Home could be a perfect opportunity for these borrowers.

Here’s A Few Awesome Ideas Real Estate Investors Should Consider:

#1 The Buy, Rehab, Rent to Own Home Model
Often, an investor will buy a property with intentions to rent it for a profit. They may fix up the property, but usually rehab at the bare minimum. Other times, they buy it and flip it. A buyer pays for the home with added value and the investor profits from the improvements and a lower purchase price.

There can be value when an investor buys a home, rehabs it similar to a buy and flip, and leases it to a future buyer. If you give a tenant the option to buy the home, they are more willing to do a better job with the upkeep of the property. You could even create some incentives for their upkeep and property maintenance.

#2 Offering a Shared Appreciation Incentive
A tenant renting a home with the option to buy it would love if an investor shared in their property's appreciation.

For example, the Relevium Project, a Benefit Corporation located in Maryland, created a model, which gives its future buyers up to 50% of the equity in the property. This allows the tenant to have an incentive to maintain the home, possibly get equity at their purchase, or get some closing help.

#3 Tenants Creating Some Sweat Equity
It’s common for to require the tenant to pay for some or all of the property repairs. If your tenant is preparing for homeownership, sweat equity could create fiscal responsibility. Sometimes, an investor could have a deductible before you need to pay for any repair costs.

If you are signing an agreement with some sort of sweat equity deal, review the terms and contact an attorney to make sure it’s on the up and up.

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