Is renting to own a good option. I heard that it was a predatory scheme. Is this so???

Question

I am getting marreid soon and would like to move to abetter neighborhood. I was looking at some rent-to-own houses. Financially, is this a good idea or is it a scam and what are the ins-and-outs to the renting to own process.

Answer 1

1. The deal depends on the specifics. Some are great deals for certain buyers. Some investors do take advantage of people. Some buyers also have expectations that are unrealistic. If you want a property now that you can not afford until later expect to pay for that privilege. Like buying anything on time, it will cost more in some fashion.

2. There are some states that set out specific regulations. Some are really badly designed in that they focus on one type of contract but not another that accomplishes the same. Mostly consumer protection laws that were designed without the writers of the law understanding the full picture. Some of the time passed with the support of real estate agents so that people will need to pay an agent before they can sell to members of the public.

There are scams but the regulations are not that well designed yet.

3. You need to understand why you can not afford to buy now. Will something change in the future. Most all rent-to-own programs have a time limit by which you need to cash out the buyer. If you do not you lose the extra money you have paid in. This is not the investor conning the buyer but the buyer just not being real about getting a loan in the future to finish the purchase.

4. One example of when a rent to own can be a great option is when someone wants to buy a specific house but needs some time to pass for a divorce to settle. They will have money later to buy but not right now. They want to get the children into the local schools and do not want to be renting for 1-2 years and then move again. They know that they can buy and get financing in the future, just not right now.

The investor likes the deal because they get to keep the property as a rental but without the hassles that come from a straight rental. The tenant will act more like an owner than a tenant who expects the landlord to do all the minor maintenance. Note that the major maintenance still is the responsibility of the landlord and can not be made the responsibility of the tenant who is renting to own. The landlord might also get tax benefits by holding longer than 12 months so agreeing a forward sale means they know they have it sold but can still wait to get the better tax rate (capital gains tax rate).

Answer 2

You'll end up paying twice as much as you should and those contracts have so many clauses that if you're late even once you could lose everything you've invested. Please be care-full! ;-)=