I am an apprentice union construction worker and i am early in the program and i own a small successful lawncare business. Me and my wife have been renting the past two years and don’t have the greatest credit (it’s not horrendous or anything but definitely not the best) and we would love to be able to settle in to a home that we can call ours and build on in 6 months when our lease is up. A few more years into my apprenticeship program i will be making killer money + my side business + her job so genuinely i think a rent to own type of situation would fit us perfectly as our income over the next few years projects to increase pretty drastically. I have read good things and bad things about these kind of agreements and i don’t even see any listings for them in my area so i would probably have to do some searching. My aunt is a real estate agent and uncle works with home loans so i have some people i could talk to. Just here to ask if seeking this kind of arrangement out sounds like it’s a good idea or worth my time.
Thanks!
Posted by luketucc
5 Comments
You almost always get screwed on a rent to own.
The only thing you want is a a rent with an option to purchase at X price within X amount of time .
They really aren’t worth it.
the reality is that most sellers want money now. They don’t want to be landlords. And most landlords, want to rent their house, not sell it. Rent to own becomes the worst of both worlds for everyone involved.
Which often means, the people who offer it, do so as predators. They accept higher than average rent, then find some technicality to cancel the sale or not be good landlords because you have a vested interest in maintenance.
It also tends to be a bad deal for both sides since you are agreeing to today’s price, but not closing until the future. Which means one of you is missing out on the “real” value of the home at the time of the actual sale.
As it is very uncommon, you also limit your options significantly.
In short, it is NOT worth exploring this option.
I’d suggest you go get a pre-approval to understand what you *could* buy today so you can plot what needs to happen when you are ready. There is usually no cost to a pre-approval, but there might be a credit pull. Even still, it won’t hurt you too much if you never actually get a loan.
Also understand that closing costs are high in purchasing. So this is also why, over <5 year periods, it often makes more sense to rent instead of buy. You might just not be ready yet.
Rent to own situations are almost always predatory and a terrible deal for the buyers. Typically you have to put up a large non-refundable down payment and then if you are ever late with a payment or aren’t able to purchase the house you lose the down payment. The property is going to be a rental-grade property as opposed to a home that is market-ready.
Rent until you can buy, and don’t buy the rental you are in. The landlord only sells when the property is no longer beneficial for them to keep, which is usually when it is due for large maintenance expenses, like a roof, HVAC, or water heater. Each of those is usually needed after about 10years.
When you can afford to buy, look at the best options available to purchase in your market.
Keep in mind that this arrangement isn’t an official program, it’s a dude who wants to make more money off of you. So first, you’ll need to find a landlord who wants to sell, then you’ll have to go live in that place
Keep in mind, it’s pretty much like leasing a car, which is a poverty trap. Not only do you pay for the car’s depreciation, but after you’ve paid for it, then they give you the option of paying for it again.
Best of luck!
I recommend renting for another year or two and fixing your credit. Then you can get a decent loan with a real lender.
Rent to own almost never results in the “buyer” owning anything. That’s because it’s an end run around the FACT that the buyer is not in a financial position to buy a house — which you admit is your situation. The very design takes advantage of your desire to own despite your “not the best” credit and income that is, let’s say “not what it will be in a few years.”
If you’re reading “good things” about rent to own, I bet you a nickel it was written by someone who runs a rent to own operation.
When it comes time to buy, please interview at least 3 agents *in addition to* your aunt, who I’m sure is a lovely person. Using a friend of family member as an agent is signing up to be screwed and feel you have no recourse but to take it.