A lot of people start their journey to homeownership by renting their home. Wanting to own a home is smart, though saving up for a down payment can be quite challenging.
You might have heard of people renting to own. If you want to take your steps toward homeownership, the rent-to-own process could be a good choice for you.
What Is Rent To Own?
Rent-to-own is a legal agreement made between a renter and a landlord, wherein the renter expresses interest in purchasing the home in the future. Typically, the purchase will take place anywhere from 3-5 years from the date of the agreement.
Rent-to-own is different from a standard rental agreement in that you must provide an up-front deposit, as well as any premiums, on top of the normal rent that you pay.
The deposit and premiums will go toward your down payment.
Why Renting To Own Is A Good Idea
One of the most common reasons people choose the rent-to-own option is that they don’t have enough money to put in a down payment. Rent-to-own gives people the ability to eventually own a home in a specific neighborhood that they wouldn’t otherwise be able to do.
There are financial benefits to investing in a home that you will eventually own one day, as well as building up equity in that home. Think about it, you may pay $500 into your premium every single month, meaning in as little as a year, you’ll have invested $6,000 in your home equity.
Understanding the Market
Having a good idea of the market is crucial when deciding whether renting to own is a good idea for you. Are market prices stable or appreciating? Your home price is fixed when you sign your initial agreement. If the market declines along with the value of your home, you aren’t exempt from paying the price you agreed on.
You and your landlord will have to agree on a reasonable percentage for appreciation, meaning you should get to know the market.
Know The Condition Of The Home
While it might seem obvious, you want to make sure that you know the condition of the home like the back of your hand. Is there anything in the home in need of improvements or repair? If so, you might be able to negotiate the final purchase price down.
Too many people end up spending far too much money to make repairs while renting, eventually blowing through their cash reserves and not having a way to make the purchase once the agreement is up.
Final Thoughts – Is Rent To Own Right For You?
If renting-to-own seems like a good method for you future ownership, then we wish you the best! Approach this process with caution and get to know everything about your future home.
If you’re planning on selling your current home to enter into a new rent-to-own agreement, make sure to get in touch with us here at TruBuyers. We can help you sell your home quickly for a fair market value price.