Is your credit score holding you back from getting a home loan? Are you struggling to come up with a downpayment? Than the Rent To Own option may be for you.
When you Rent To Own a property, you are doing a deal that will resemble a combination of a purchase and a standard tenant rental agreement. It will feel a lot more like a rental agreement with a landlord in most ways, with the caveat of you being responsible for property taxes, home owners insurance, and maintenance expenses in exchange for the option to own the property after the principal balance is paid off.
Show me some numbers
The numbers on a deal like this will vary based on certain factors, but the formula will look something like this.
Purchase price minus downpayment = principal balance
Principal plus interest = monthly payment.
Sometimes we run the numbers starting with the purchase price, or sometimes we start with the monthly payment amount and work backwards, but the formula is about the same. We will have to run the numbers on your specific deal after we get your application approved and identify a property within the criteria determined during the application process.
Remember, you will also have to be able to afford the utilities, maintenace, property taxes, and home owners insurance.
Owning the equity
The only way for you to cash in on the equity is by paying off your principal balance in the monthly installments. You will not be able to resell the property and retain the appreciation in equity. There will be a clause that states the purchase price is subject to inflation based on market value in the event of an early pay off if the principal balance is over $10,000 and that you are unable to sell the property to another buyer for one year after the property is fully paid off.
This is because it would be unfair to me to purchase a property and give the equity away to a tenant who is otherwise unable to afford an investment. Without this clause, a person could become a “flipper” without having sufficient credit or funds for down payments by taking advantage of a loophole in the Rent To Own system. Therefore, I retain rights to the equity and you can only cash in on the equity by paying down your principal during the course of the monthly payments over the term. You can pay off your balance when the principal is less than $10,000 without a market value purchase price adjustment.
Otherwise, a pre-payment or an attempt to sell to another buyer would result in a purchase price adjustment to the current market value at the time, or the price remains the same, whichever is higher.
Where to begin
To qualify, you will need to go through the same rental application process as any of our other tenants. All adult occupants need to be on the lease. However, we can write into the lease that only one of the tenants is exercising the option to purchase. That way, you can have roommates without violating your agreement, but they do not receive any rights to the ownership of the property. All occupants need to be on the lease and subject to its terms without exception, and therefore must submit a rental application. So as people move in and out, lease addendums and rental applications must be processed. But we can ensure that only those you designate (whether it be just yourself or you and others) are the only ones who have the rights to ownership after the principal is paid off.
Go to our Rental Application page. I encourage you to review it and the qualifications to ensure you are prepared and able to qualify. Rental application fees are non-refundable. We are spending that money on administrative costs and are just passing SOME of those costs to you. We will have some financial skin in the game too, so no matter what the outcome is, your rental application fees are spent and non-refundable.
Shopping for a home
Once you have an approved application, then next comes the selection of the property. We may be able to present you with some options, and you can present us with options as well. Once you have an approved application on file, it will serve as a sort of pre-approval to start shopping.
We will start to look for properties within your criteria, and we would encourage you to shop around as well. You can schedule viewings and when you find a place you want, let us know, and we will pursue it for you