Leasing to own is a viable way to purchase property, especially if you have poor credit or if you don't have enough money saved up for a substantial down payment. With a lease option or lease-to-own option, you are giving yourself the opportunity to purchase the home you are living in. Before entering this type of agreement, you are going to want to make sure you understand the agreement.
#1 You Pay a Higher Rental Rate
With a rent-to-own contract, your monthly rental rate is going to be higher than the standard market rate for rent for the particular type of property that you are renting.
When it comes to formal contracts, you have to pay over market rate to work towards purchasing the home. This will help you look more appealing to a lender when you move to buying the home. Showing that you are able to pay a mortgage-sized payment will help you move to purchase the home after the lease ends.
#2 Know the Required Deposit
Before you go into any agreement, you need to figure out what the deposit will be that you will need to make for the purchase to be finalized. The price for the home should be set, as well as what your obligation will be. Before you enter the contract, you need to know what you will need to pay at the end of the contract in order to purchase the home.
#3 Establish the Transfer of Deed
The contract when you start to rent the property should clearly lay out the process of transferring the deed. A lawyer can look at the contract and make sure that this process is clearly established. You shouldn't enter into this type of contract unless it is clear the buying process will result in the purchase of a home at the end.
#4 Establish Responsibility
Finally, you need to make sure all levels of responsibility is clearly established. With rent-to-own, the relationships can be a little fuzzy when it comes to who takes care of what, as your landlord still owns the property, but you are working to become the owner in the future.
It is important for the contract to clearly state who is responsible for taking care of the property. The contract should make clear who will pay for repair, upkeep, and maintenance. There should be a system for keeping track of all this information as well.
Rent-to-own can be a great way for you to purchase property. However, it is not an easy process, which is why you need to have a real estate attorney look over any contract before you sign it.
Share24 May 2019
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