While working with many buyers and sellers throughout the Chicago area, I am often asked if I have any rent to own properties. People who are interested in these types of homes view them as a path to get them closer to home ownership while they save up the money to buy it. This path, however, may not be as clear as it may seem. Actually it may slow you down. Let’s take a closer look and see exactly what a rent to own home is.
What does “rent to own” mean?
“Rent to own” homes are homes that you lease usually for 1 year or less, that comes with an option for you to buy it when you are ready to purchase. The purchase price is usually determined when the contract is signed, meaning that you can lock the price in a year in advance. This is often advertised as a way to buy a home at a discount price, assuming that the real estate market increases in value. They also tell you that you can test the home out to really see if you like it. Or maybe if you don’t have the money, you can rent the home out, and keep the home in your possession until you are ready to buy.
When dealing with real estate, always remember that nothing comes for free. In order to get the option in your lease, it often costs a lump sum at the beginning of the contract. This sum does not go toward the rent at all, it just an extra cost if you want the rent to own option. Also, if your contract is up and you decide not to buy the house, you do not get that money back.
What really happens when you rent to own
Here is what usually happens when someone goes with a rent to own home. The only reason most people even think about doing rent to own is because they believe that they cannot afford to buy a home, either because of money or because of credit. Rent to own homes advertises that they can put a certain home on hold until they can save up the money, or build up their credit, to buy the home outright. Of course this option comes with a fee.
However due to the upfront fee and the rent they have to pay, people are hardly ever able to save up enough money to fix their credit or to put towards a down payment. They struggle to make ends meet throughout the contract until it expires, along with their option to buy and their upfront fee.
Conclusion
Many people consider rent to own as an option when they want to buy a home, but feel that they cannot afford it yet. Although rent to own may seem good on the surface, it often ends up costing you more money and leaving you right back at square one. If you are really serious about buying a home, you are better off renting and saving your money until you have enough. I would also advise you to speak to a mortgage lender, so you can know what steps to take in order to qualify for a loan. You might be surprised at how close you are to buying a home! As always, if you have any questions on concerns, feel free to contact me today!