Rent to own has been around a long time. It is also sometimes referred to as Lease with Option to Buy or Lease to Purchase, but all terms mean the same.
For many individuals this is an attractive means of purchasing a home. Say for instance, you have credit issues that won’t be cleared up for a year or so. It’s best to find a Seller who is willing to write a Lease to Purchase Contract. This way you can go ahead and move into your own home and settle in with your family.
A portion of each month’s rent will go towards the purchase price of the house. How much depends on the terms of your contract. A good negotiator might even be able to get 50% of the rent to go towards the purchase price of the house.
Normally, in Lease to Purchase Contracts, the Seller will want money down on the home.
This gives them some assurance that you are a serious buyer. This money can also be used as a “Deposit” should you eventually decide against purchasing the house. It can cover damages that you and your family may have done to the property. These are all issues that should be addressed in your Lease to Purchase Contract.
Certain properties are more feasible for the Lease to Purchase Contract:
- Homes that need repairs
- Homes that have little or no equity
- Homes located in less desirable areas
- Homes that are For Sale by Owner
There are also Buyers who are more likely to be drawn to this type of sale:
- Buyers with poor credit
- Buyers involved in a divorce
- Buyers who don’t have a lot of cash set aside for a down payment
- Buyers who are self-employed
Info for Sellers to Consider
If you have a home to sell and have had it on the market for more than 6 months, you might want to look into the Lease to Purchase option. By allowing this option, you greatly expand your market of homebuyers. Your pool of buyers goes from a pond to a lake.
If you’re concerned about whether you will get your money eventually, then know this: You can ask for whatever terms you wish in your contract. If you’re looking for cash flow, then ask for a sizeable down payment. Often a buyer has cash to spend but their credit is flawed. Stipulate in your contract what portion of the down payment will go directly to the seller should the buyer default on the contract.
Another consideration is this: In most Lease to Purchase Contracts, the property is returned to the Seller if the Buyer defaults in any way. This way you get your house back and can resell it. Usually, there will not be any significant damage to the property because the homeowner believed that the house would be theirs someday. For this reason, there may even be improvements to the property.
For both the buyer and the seller, Lease with Option to Buy can be an attractive proposal.
