Did you know that the number of households renting in the U.S. has significantly increased during the last decade? Renting a home might gain you more flexibility than owning a home. However, what about the renting to own a house process? The rent-to-own property provides you with the unique opportunity to avail the advantages of being both a tenant and a property owner. Here are some crucial things to consider when renting a property to own.
A Rent to Own Process is an Investment
A few innate aspects of the rent-to-own process make the rent to own home a thorough investment. If we talk about a traditional rental home, it is easy to see that the rent money doesn’t generate wealth.
Simply speaking, rental money is a fixed cost. In contrast, when you are renting to own a house, a portion of the money is actually an investment. Then there’s the appreciation of the home’s value. Because the process ensures that a fixed portion of your payment is set aside for the home’s purchase, it acts as a home savings plan.
The rent-to-own process of a home is a practical option for people who don’t have a lot of savings. Conventional mortgages often target a 20% down payment as a goal. With a rent-to-own home investment, you have a more creative option to exhibit that you are capable of making payments for potential homeownership.
No Good Credit Score Required
Unlike conventional mortgages, you don’t necessarily need a good credit score for starting the rent to own process. According to expert Realtors, the rent-to-own process is an excellent way to qualify for a future loan if your credit score needs some help.
It is easier for buyers to qualify for a home loan with a rent to own agreement. Over time, as part of the process, the buyer can work on refilling their credit score. When the time is right, they may be able to get the required loan and purchase the house.
Nonetheless, before signing any contract, it is crucial to understand all the details. For starters, in a lease-option, you can purchase the home (at the time of the lease’s expiry) or move out without facing any penalties. In a lease-purchase contract, you are required to purchase the property when the lease is up. It’s important to have an experienced Realtor guide you through this decision-making process.
No Property Taxes
Another essential benefit of renting to own a house is that the landlord is responsible for paying the property taxes until the ownership is officially transferred to the tenant. This enables the renter to save some money on the side to take care of additional expenses later.
Remember that proper homeownership requires some additional costs, such as insurance, repairs, maintenance, taxes, etc. While tenants don’t have to pay property taxes they should be preparing for a time when they do. Put money aside for future costs, both expected and unexpected.
Build Equity Faster
In contrast to traditional mortgages, equity is built faster with the rent-to-own process. This is due to the fact that appreciation typically increases.
Tenants who are renting to own a house are more motivated to take greater care of the property. They may even indulge in some home improvements knowing that one day the home will be theirs!
There’s even a possibility that the purchase price is lower than market value. Motivated sellers are more likely to offer a rent-to-own option to a potential buyer.
Full Control of the Property
Even before the renter has paid the full amount of the house, they have full control of the property. There should be specifics detailed in the contract regarind what improvements are allowed and which are not.
As an added benefit to the owners, tenants living in a house they are under contract to purchase will do a better job with upkeep. It’s a great solution for both parties if they want to transfer ownership over time and still maintain some positive cash flow.