Rent-to-own homes are properties where a buyer can rent a home for a set period with the option of purchasing it at the end of their repaying their lease. Before getting ownership of the property, they settle the price and the contract with the current owner before the rental lease begins. If the buyer decides not to buy the property at the end of their contract’s term, the property and rent credits will be returned to the seller.
These conditions are ideal for buyers who may not be financially ready to take on a mortgage. They’re also great for people who are improving their credit and cannot qualify for a mortgage at this time.
In the following paragraphs, you can learn more about the rent-to-own housing option and how it can benefit your situation.
Rent-to-Own Agreement
A rent-to-own agreement has three parts:
- Rental agreement: outlines the terms of the arrangement
- Option agreement: specifies the period during which the buyer has to consider purchasing the home
- Sale contract: specifies the sale term and price
The rental agreement can be as simple as a one-page document that outlines the specifics of the rent and lease terms. This includes the length of the lease, the rent due each month, the down payment, and the required rental payments.
The option agreement outlines the period a buyer has to decide whether to purchase the property. The landlord or buyer can provide it, but it must be in writing to be legally binding. Additionally, the option agreement must clearly state the length of time the buyer has to decide whether to purchase the property, the rent due each month, the amount of the down payment, and the final purchase price (if not already identified).
Some rent-to-own agreements have a clause that allows the buyer to purchase the home at any time. This negates the option agreement and enables the buyer to make the purchase without giving the landlord advance notice or waiting for the option period to expire.
Payment Options
Most rental payments will cover housing expenses such as a mortgage, property taxes, insurance, and maintenance, depending on the housing market and demand. If the buyer decides to buy the house, all of the previous rental payments will be applied to the down payment or purchase of the house.
At this stage, the seller has the option of keeping this money in a separate account and rolling them over to the buyer or deducting the rental payments from the home’s cost.
Benefits
A rent-to-own option has numerous advantages for both the buyer and the seller. When it comes to qualifying for a loan, the buyer’s credit will often be less of a consideration, and their down payment may be lower depending on what the seller agrees to.
If the seller does not need to sell the home immediately, they might benefit from the monthly cash flow. Another advantage for the seller is that the buyer is more inclined to take better care of the house, knowing that they may one day own it.
Conclusion
If you’re thinking about renting to own, you should talk to a real estate broker or agent specializing in buying and selling real estate and property management. They can assist you in completing the transaction, discussing the benefits and drawbacks of rent-to-own homes, and helping you in executing the terms.
Let us help you find rent-to-own homes in Mount Dora, Florida! We at Orlando REO Professionals are experts in providing top-notch investment property advice and wealth management. We also specialize in property management, real estate, and real estate-owned properties. Book a consultation with one of our agents!