Rent to own property is the only deal possible without cash. For years now people have resorted to this option to buy a house. Rent to own property is a simple solution to homeownership. The idea is unfussy, just rent an accommodation with an option to buy, by paying a small down payment, along with a higher rental. After the agreed period of time the house belongs to the renter after the balance amount is settled. The rent to own property is exchanged for cash between the renter and the owner. The extra amount collected towards rentals is calculated in the final transaction, this amount goes towards the house price.
Rent to own property works perfectly well, if the renter and the owner are clear with their side of the contract. In the case of a sliding property rates, the renter will find it difficult to acquire finance. The reason being the value of the property is depreciating and acquiring loans will be rather difficult. So, it is better to rent a property for a while, till the markets get back on track and then exercise the buy option. This technique is followed by many first time buyers and even sellers find this option lucrative. From the sellers point of view the property will attract a lesser value during time of crisis and they will incur huge loss, whereas, a rent to own property plan can help tide over the crisis easily. The house can acquire a decent rental and a buyer is ready to buy the property once the housing sector recovers.
Never buy a property in a dropping market scenario as the price of the house also drops, leading to negative equity. Allow the markets to steady and then exercise your buy option. Apart from this it is difficult to acquire the required amount as the lender’s loan-to-value limits will be difficult to satisfy.
The paper work for rent to own property needs to be drawn without any flaws. The agreement should be favourable to both the parties. It is advised to mention the rental amount, due date, down payment and the percentage of rent amount that goes towards down payment. Penalties and late payments also need to be mentioned in the contract. This is for the safety of both the renter and the owner. In case of a dispute, the rent to own property contract can help sort out issues. If everything goes according to the plan, the renter will own the house at the end of the term.
One should be cautious while exercising rent to own property scheme. Never risk doing this all by yourself. It is best to consult a lawyer who can guide you and bring to light the legal aspects of the deal. A landlord has to abide by certain rules and regulations. Since, time is involved; chances are that the market can swing in any direction. But the rent to own property contract should be strong enough to decide impartially on the deal. With proper professional guidance rent to own property will be a grand success.