Thinking of other creative strategies to build your wealth on real estate investments?
You might want to go for the booming rent-to-own real estate!
“A number of sellers, particularly developers, are turning to that [rent-to-own]” and “it’s definitely growing”, said the Urban Land Institute. Major factors behind the sudden boom in this real estate market sector are the declining housing market in concert with tougher mortgage lending standards.
Under these volatile conditions, buyers and sellers jump on this option where both sides theoretically win. A seller, who might have been struggling to sell his house in the past years, gets a continuous flow of cash from monthly rent; whereas, the tenant and potential buyer transitions in the new home even if they don’t have much cash for a down payment or can’t afford to take out a mortgage immediately.
Rent-to-own, lease-option and lease-purchase agreements are essentially the same, under which a tenant/buyer rents the house for a particular period of time and may or may not purchase it after the prescribed period.
Rent-to-own arrangements can be tempting for both the buyer and seller—but is especially attractive to sellers—owing to the numerous benefits it can bring in.
Under these arrangements, a tenant rents the property at a cost slightly above the market rate. In other contracts, landlords require a pricey upfront fee of 1 to 3 percent of the property’s purchase price instead of increasing the monthly rent. In both cases, these can be credited as down payment should the tenant decide to buy the house later on.
Here’s what makes it especially attractive to would-be rent-to-own investors: lest your tenant complete the transaction of purchasing the property after the lease option expires, all of the rent payments made by the tenant can remain with you.
This arrangement also allows the seller a way to lower the home’s price, taking the property off the market or renting it out for a longer period of time. Also, the selling price of the house is explicitly stated in the lease-option contract, which protects you from sudden and significant housing market declines. Add to these the benefit of your tenant paying parts or most of your mortgage, property tax and insurance.
See how this option can be a win-win situation for a wise investor and a prudent and dependable tenant-buyer? If you are ready to buy a home through renting and need financing to help you do it, you may contact PrimeLending. We offer various loan options including customized home loan to fit your need and paying capacity.