Rent to Own?

Question

As a young college student like myself I obviously don't have too much money. That said, I really need and want to move out and get on my own. I was just thinking that it wouldn't seem as "smart" to blow all of my hard-earned money without getting something in return out of it. Since this is a big decision, I have plenty of questions. Have you ever rented to own and is it a good idea especially for someone like me? What is better: renting an apartment, duplex, condo, or house? What is better in terms of renting to own? How much money should I save up before I attempt this and what would be a reasonable mimimum salary that I should be making?

Also, if it helps to know, I live in Florida along the coastal areas.

Answer 1

Rent to own is illegal in most states now, if you do it, prepare to be ripped off. Just rent for now, buy later...

Answer 2

Well, if you live in Florida along the coastal areas, you may prefer to rent without owning, only because of the high probability that a hurricane will knock down everything you OWN.. lol..

But let's just assume that hurricanes are not an issue, as a rule of thumb, your monthly rent, or mortgage payment should never be more than 26% of your Gross Monthly income.
Some banks will lend you amounts close to 28% of your monthly income, this is alright if your income is stable, and large enough (80k+).

Owning is a fantastic thing. First of all, you can deduct your interest expense off your taxable income! This is something you can't do if you're renting! By doing this, you end up with a smaller tax bill each April. Also, you accumulate equity.

Maybe you didn't hear me; YOU ACCUMULATE EQUITY!

This is really a large statement because you accumulate equity in two ways: (1). for every payment amount that gets applied towards your principle balance; (2). for every (% point) your property value increases relative to market growth. Since you live in Florida, you're no doubt herd how housing prices have exploaded! When you own, you are gaining equity everytime the market displays consistent upward behavior.

Lastly, there is an inherant tax advantage to owning a home after it is paid off. You can take out a Home Equity Loan! This allows you to enjoy the benefits of all the equity you've built into your home all these years, without actually selling it. What are the tax advantages? If you use any amount of the home equity loan for home improvements, you can depreciate the full amount of the improvements from your taxable income across several years. Also, the interest on such a loan is an expense which can be deducted from your taxable income each year.

Bottom line, it sucks to rent; it pays to own! One of the many ways the U.S. government makes life easier for the working class : )

Answer 3

2

Answer 4

To me rent to own means they cannot sell the house for some reason, the economy, the price, the condition of the home, etc.

I would rent something in my price range that would not strain the budgt. ANY extra money I would put in a bank and get interest so that in the future I could purchase ANY house.

You need to have at least one year's salary saved for an emergency before you start thinking about owning a home. There are constant costs owning a house from the property tax to the insurance to repairs to power bills, on and on.

You will need 10% of the selling price of the house in cash when you are ready for the down of the house. Figure that the mortgage payment will be about 11% final price of the house in monthly payments. So to buy the average house of $250,000 you will need $25,000 just for the down payment and then you still have your monthly house payments.

Give yourself time to get established in a good paying job. Save all you can. And realize you may end up relocating within the next few years so having a house is just one more thing to deal with if you change jobs.

Answer 5

Freedom only comes with wealth.

Rent the cheapest place you feel safe and can tolerate the standard of living and then save as much as you can.

Once savings are built up you will have options.

Keep rent or mortgage loans below 33% of your gross income and you will have flexibility to enjoy life and meet the natural uncertanities.

If you get yourself into a situation where rent/mortgage is above 33%, you are one uncontrollable event away from disaster.

Think of rent to own as a purchase decision. You basically pay rent with an option to convert later. If you don't convert, the rent is lost just like you were renting before. In simple terms, don't do it unless the you want the place to be permanent. Other wise rent as descibed above (safe and cheap) and save money, this gives the most flexibility later on.

Answer 6

i would only do the rent to own on a house and that's only if you like the house enough to want to live in it for awhile. but take in mind, that you will be still responsible for mowing the grass so you may have to go buy a lawn mower or have extra money each money to hire someone else to do it. i personally would rather rent an apartment until you get to where you can afford the rent while having alot of money left to save. Here i had to put down $450 deposit on my last apartment. And after i got married i bought a house. it's really just up to you whether you want to have to work and take care of the lawn and expenses of rent to own or take the easy way out for now and just rent.

Answer 7

Don't do rent to own, and don't think about "land contracts" either.
a) rent to own is basically like renting. Roughly 10% of what you pay a month go towards your down payment for when you get financing through a bank.
b) land contracts are shady and my attorneys have advised against it.

My atty has said, that if I want to buy on a land contract (originally what I wanted to do), to just get a trust for deed. The seller acts as the bank, you pay each month and you build equity. Once it's paid off, it's yours. To do this you just pay an atty however much (mine was $500), and he does a title search.. draws up a trust for deed and takes puts your money into escrow.