I've been approached with this concept. How would a purchase like this work? How does the owner benefit? Is it a trick?
2006-12-08 04:13:58 · 7 answers · asked by Mic B 2 in Business & Finance ➔ Renting & Real Estate
Just like furniture. Your are just renting the property unless you pay off the full amount. For the owner he rents the property at a higher price and usually get to keep it.
2006-12-08 04:17:53 · answer #1 · answered by shadouse 6 · 0⤊ 0⤋
No it is not a trick
This can be a great way for a first time borrower without a huge down payment to qualify. The idea is that a portion of rent goes towards the down payment. After a 1 - 2 year period this can help tremendously. Owner benefits by getting full value for his house.
Concerns are purchase price...should never exceed true value.
Here is some additional info. Hope this helps.
2006-12-08 13:04:54 · answer #2 · answered by Anonymous · 0⤊ 0⤋
Rent to own is a concept that can work for both parties, assuming the landlord wants to sell the house and you are willing to buy RTO is a way for you to make a downpayment by paying more rent each month.
I've seen RTO structured in such a way the tenant would pay additional rents each month for a period of time, (say 3-5 yrs) this additional money is set aside by the landlord to be defined as escrow to a FSBO/owner carry finance condition of sale.
The Owner if in the financial condition to carry the mortgage, continues to hold financing and the tenant now the buy is also paying interest. General Owner carry financing is at a higher rate then what a person could get at the mortgage company if they have good credit.
If one does buy in a RTO option, it is best to do a balloon payment note to pay off the note with a "real mortgage" to decrease the amount of interest you pay.. If you need the RTO to build up a downpayment great, but define for your self a way to close the RTO contract to end the rent/RTO contract to clear ownership.
2006-12-08 12:36:54 · answer #3 · answered by Anonymous · 0⤊ 0⤋
The owner benefits by continuing to get the interest credit for the home while it is being rented. In addition, you can set a sales price for the home in the rent to own contract that might be better than what you could get when you actually sell the house. One more thing is that the renter or buyer can qualify for a refinance of the home rather than a purchase when they take ownership which reduces your tax liability on the sale.
2006-12-08 12:17:55 · answer #4 · answered by flamingojohn 4 · 0⤊ 0⤋
When you sign a lease agreement there is an option period you are given to purchase the house at a certain price (after the lease is up)
the advantage to the buyer is you don't have to come up with a big down payment or any closing costs, just the rent and a deposit and you know what price you are willing to pay for the house. The advantage to the seller is he/she is getting rental income during the lease period and knows the selling price for the house.
2006-12-08 12:17:59 · answer #5 · answered by romasuave1 2 · 0⤊ 0⤋
We bought our house that way. No problems. You go to a lawyer with the owner and have a contract drawn up and you both sign it.The owner benefits by getting rid of the property so he/she doesn't have to do the up keep or taxes on it. It saves you a lot of money in the long run.
2006-12-08 12:45:25 · answer #6 · answered by ruth4526 7 · 0⤊ 0⤋
many times it is a scam - watch for penalties that can cause you to lose your investment
the advantage for owners is they can sell housing that does not meet FHA standards
NEVER SIGN UNLESS THE OWNER CAN SHOW CLEAR TITLE AND A VALID TITLE SEARCH DOCUMENT if you don't have an attorney look at the deal you will get screwed
2006-12-08 12:18:08 · answer #7 · answered by Anonymous · 0⤊ 0⤋