Friday, May 14, 2010

Renting to Own

[Disclosure: This is a sponsored post -- I'm being paid to write and publish it. I always identify sponsored posts at KN@PPSTER; I also decline opportunities which don't meet my personal standards of honesty/ethics and usefulness to my readers]

I've never gone the "rent to own" route before, but that's because I never found the right house at the right price when I was on the market for one.

Phoenix Rent To Own Homes is the kind of search engine I'd have used to find a good "rent to own" opportunity if it had been around when I was looking for one (note: The URL is specific to the Phoenix, Arizona area, but the search engine behind it returns nationwide results; I've just been looking at homes in my own home area of St. Louis, MO).

What is "rent to own?" It's pretty simple, really. It's just like renting a home, only the tenant has an option, built into the rental or lease contract, to buy that home for a specified price. Usually that option will also include putting some portion of the rent you paid before you make your decision toward the purchase price.

Example: You find home priced to sell for $100,000 and enter into a one-year "rent to own" lease on it, with 100% rent application.

Your rent is $1,000 per month.

At any time before that one-year lease expires, you can notify the owner that you've decided to buy the property. The rent you've paid ($12,000 if you make your decision right before the lease expires) is deducted from the purchase price.

That's the basic outline, anyway. There are variables. For example, some "rent to own" contracts don't apply 100% of rent.

Some "rent to own" sellers will carry the paper themselves (i.e. you make "mortgage payments" to the seller), others will require you to get a mortgage elsewhere so that they get their full purchase price up front.

Some "rent to own" leases are renewable (i.e. at the end of the first year, you can renew the lease on the same terms for another year, with rent continuing to accrue toward the purchase price), some of them aren't (i.e. at the end of the year if you don't buy the house, the rent you've paid disappears, just like regular rent).

The up side to "rent to own" is that if you decide to buy, you're effectively converting some or all of your previously paid rent into home equity.

If there's a down side, it's that the rent rate may be slightly higher than you'd pay for the place without the purchase option.

In today's housing market, "rent to own" has distinct advantages.

The number of unsold properties on the market, including properties that the current owners are looking for a way to make their own mortgage payments with, makes it more likely that you'll find a very good deal.

Going "rent to own" gives you more time to decide if this is the home you want.

It also lets you build effective equity in that home without being trapped in it by a disadvantageous mortgage from the very beginning.

Of course, it all starts with finding the home you want, and that's where Phoenix Rent To Own Homes comes in.

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