The decision to apply rent credits or option money to the down payment is made by the lender, not by the seller, you, or the tenant buyer. I most often see the option fee applied to the purchase price and rent credits treated as "seller concessions." On occasion I have seen lenders apply the option fee to the down payment, but this is the exception rather than the rule. A good mortgage broker can steer you to investor friendly lenders.
Most of us are very familiar with the term “rent to ownâ€. Places such as Prime Time and Rent A Center have built an empire with rent to own merchandise, although the buyer normally ends up paying double what the merchandise is actually worth. While this may be great for those who have bad credit, most of us prefer to avoid going this route. Homes are no exception, especially if you are buying a home on a rent to own basis.
Even though rent to own may be good for a short period of time, it proves to be an expensive way for someone to buy something they intend to keep. Rent to own merchandise for example, may sound quite compelling at a few dollars a week. The agreement is normally for around 15 - 20 months, which is where the company makes their money. Although you may be paying just a few dollars a week, the total amount quickly adds up to nearly twice the cost of the item.
Along with paying rent, you’ll also have to pay applicable sales tax as well. Like merchandise, rent to own real estate has it’s disadvantages. Even though it can be great for those with not so great credit, you’ll normally end up paying back a lot more than you would with a mortgage. You’ll still have to pay back your lender with a mortgage, although that amount won’t be nearly as high as it would if you decided to get a house on a rent to own basis.
In most cases, rent to own houses are put up on the market by the owner. This way, you’ll deal directly with the owner. It will start out as a traditional lease, then proceed to a rent to own basis if you decide you want to keep the home. You and the owner will then work out an arrangement, which will normally be quite a few years. Some owners are very flexible and will work with you just to get the price they want for their home, while others will charge you quite a bit more, in order to make a hefty profit.
If you have bad credit and can’t get approved for a mortgage, then rent to own would be your next best option. Although some don’t like to do it due to the price, for many it’s a better alternative than an apartment. With rent to own houses you are paying money towards the home, instead of just paying rent. In some cases this is fine, although you should make sure to double check with the owner before you agree or commit to anything. This way, you’ll know how much you’ll be paying for the home - and for how long.
If you do a 5-year Lease Option, the SAFE Act will be the least of your worries. The Tenant will have a solid equitable interest claim. I will give you a pass on the other bad recommendation, since you said to include it in the payment, but never let the Tenant pay the taxes or insurance for the same reason as above.
I agree 100% with everything you said. Just like you said, in such a transaction safety must be paramount, but profit can be substantial with following the rules. Thanks for the tips, sincerely.
The decision to apply rent credits or option money to the down payment is made by the lender, not by the seller, you, or the tenant buyer. I most often see the option fee applied to the purchase price and rent credits treated as "seller concessions." On occasion I have seen lenders apply the option fee to the down payment, but this is the exception rather than the rule. A good mortgage broker can steer you to investor friendly lenders.
The Truth About Rent To Own
Most of us are very familiar with the term “rent to ownâ€. Places such as Prime Time and Rent A Center have built an empire with rent to own merchandise, although the buyer normally ends up paying double what the merchandise is actually worth. While this may be great for those who have bad credit, most of us prefer to avoid going this route. Homes are no exception, especially if you are buying a home on a rent to own basis.
Even though rent to own may be good for a short period of time, it proves to be an expensive way for someone to buy something they intend to keep. Rent to own merchandise for example, may sound quite compelling at a few dollars a week. The agreement is normally for around 15 - 20 months, which is where the company makes their money. Although you may be paying just a few dollars a week, the total amount quickly adds up to nearly twice the cost of the item.
Along with paying rent, you’ll also have to pay applicable sales tax as well. Like merchandise, rent to own real estate has it’s disadvantages. Even though it can be great for those with not so great credit, you’ll normally end up paying back a lot more than you would with a mortgage. You’ll still have to pay back your lender with a mortgage, although that amount won’t be nearly as high as it would if you decided to get a house on a rent to own basis.
In most cases, rent to own houses are put up on the market by the owner. This way, you’ll deal directly with the owner. It will start out as a traditional lease, then proceed to a rent to own basis if you decide you want to keep the home. You and the owner will then work out an arrangement, which will normally be quite a few years. Some owners are very flexible and will work with you just to get the price they want for their home, while others will charge you quite a bit more, in order to make a hefty profit.
If you have bad credit and can’t get approved for a mortgage, then rent to own would be your next best option. Although some don’t like to do it due to the price, for many it’s a better alternative than an apartment. With rent to own houses you are paying money towards the home, instead of just paying rent. In some cases this is fine, although you should make sure to double check with the owner before you agree or commit to anything. This way, you’ll know how much you’ll be paying for the home - and for how long.
Where did you see that language... I mush have missed it.
I totally agree LOK!
[addsig]
LeaseOptionKing,
Are you working in Seller Financing at all now? Or have you given up on looking for deals with that as an option?
Dodd-Frank is set to go into effect Jan 10, 2014 and it makes all new rules re housing including MHs.
Lots of ongoing discussion re its rules and nothing really set in concrete just yet.
If you do a 5-year Lease Option, the SAFE Act will be the least of your worries. The Tenant will have a solid equitable interest claim. I will give you a pass on the other bad recommendation, since you said to include it in the payment, but never let the Tenant pay the taxes or insurance for the same reason as above.
I agree 100% with everything you said. Just like you said, in such a transaction safety must be paramount, but profit can be substantial with following the rules. Thanks for the tips, sincerely.