A Rent To Own Contract is a Better Way of Doing Things

A rent to own contract or lease to own agreement can benefit both the investor and the renter. So, what are rent to own agreements and just why is it such a big deal.

First let me explain rent to own agreements. Everybody wants to own a home, but not everybody is able to afford their own home today.

One option they have is to enter into a rent to own contract with the landlord. This means the renter pays a deposit up front which goes towards the down payment in the future. They then rent the house for a set period of time.

At the end of that time period the renter has the option to buy the house. This way he could lock up a house that he wanted to buy in the future, today, even if they do not have the ability to buy it today.

This agreement has the potential to benefit both parties a lot more than the traditional, land lord and renter scenario.

Advantages for the Renter

The renter has a few very big advantages of entering a lease to own agreement.

1. Actually Buying Something

When you rent a house your money fades away. You are not buying anything for that $900 a month you are spending. However if you have an agreement to buy the property after a set amount of time it can be just like paying off a mortgage.

Instead of that money going to waste it is helping you pay for your investment.

2. You Can Profit

There is a chance that you can profit from this agreement. If the housing market booms and you have the option to buy that $148,000 house for $120,000 you are making $28,000 as soon as you follow through and purchase it.

3. You May Not Have to Buy it

Depending on the exact agreement that you make you will probably be under no agreement to buy it. In that case you are free to go buy another house, should you desire. The only problem is that your initial deposit will be gone because most of the times this is non-refundable.

Advantages for the Investor

If you are an investor you too have a lot of reasons to want to make a rent to own contract with the buyer.

1. Large Upfront Payments

Usually the buyer will have to make an upfront payment to lock in the property. This can be many times greater than the security deposit tenant’s pay and you don’t have to give it back if they didn’t cause any damage.

2. A lot of Demand

A lot of people want to own their own home. Therefore more people would be willing to get into a rent to own contract. This means more buyers.

3. Higher Rent

Because the demand is so high and because they are getting the house you are able to set higher rent rates. This means more cash flow after expenses.

4. Buyers Take Care of the Property

In rentals buyers really do not care too much about the property. After all would you care what happens to a place that you are just going to be renting for 6 months? Probably not.

Buyers also fell more like the property is their own and that they should take care of it themselves. This means less expenses and repair jobs for you to be concerned about. You can even enter in the rent to own contract that it is the buyer’s responsibility to fix minor repairs.

5. Long Term Contracts

Renters may come and go their own way, but rent to owner’s will stay and pay. Most renters’ view renting as a temporary thing. Someone who has entered into a lease to own agreement however considers it a great opportunity to own the house of their dreams for the long term.

If you own a lot of properties you understand how bad it can be to have vacant houses eating away at your savings. That is why long term contracts rule.

Very Powerful

Entering into a rent to own agreement can be advantageous for both parties. If you are looking for renters/landlords consider this strategy first.

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