Rent to Own can be a win/win scenario for both the investor and tenant if done fairly. There are some great companies out there that truly care about the tenant and there are ones that are out to take advantage of the tenants. The best thing to do if you are deciding to work with a Rent to Own company is to ask questions and do some of your own investigation on and offline.
Just because you may have BAD CREDIT doesn’t mean your stupid.
There are advantages and disadvantages to Rent to Own… below are just a few I came across in an article written by Mark Weisdler, a well known Toronto Real Estate Lawyer.
Here are some of the advantages for the tenant:
•You may not have the down payment now, but you will have it at the end of your lease, as a result of the additional payments;
•If your credit is not good, you can improve it by making timely payments of rent;
•You can try out the neighbourhood and if you change your mind later, you can just cancel the option;
•If the market price of your home is more than $280,000 at the end of your lease, you still get to buy it for the same $280,000.
•If the market collapses and the home is worth less than $280,000, you do not have to go through with your purchase.
Here are some disadvantages:
•There is no guarantee that a bank will give you your financing when you exercise your option. You still have to improve your credit score during the term of your agreement.
•If you don’t go ahead with your purchase, you usually have to forfeit the option payment. In some cases, the term can be extended to find out before you sign the dotted line.
In all cases, it is important that the parties have legal advice. Some agreements state that if your rent is late once, the tenant forfeits the right to buy the home. This needs to be changed so that as long as the tenant cures any default in a timely manner, they do not lose the right to buy. The tenant should also have the title checked to make sure that the correct owner of the home is giving the option.
Rent to own can work for landlords and tenants if you are properly prepared in advance.