If you are looking at different ways to own your own place, you may have come across renting-to-own schemes that sound too good to be true. Renting to own may be the better alternative to just renting outright, but what exactly makes it so different from a regular rental agreement?
Read on to know what this option is and why this could be the ideal arrangement for you.
Renting to Own: What is it?
Renting to own arrangements are agreements between the tenant and the landlord which includes renting a property for a specific period, with the option to buy the property before the rental agreement runs out. If you enter into this agreement, you can expect to sign a standard loan agreement which includes an option to buy the property at a later date.
Lease-option vs. Lease Purchase
If you are looking at rent-to-own units, you may come across two types of contracts: lease option contracts and lease purchase contracts. Lease option contracts are basically just an option to buy the apartment or house when the lease expires. A lease-purchase contract, however, may require the renter to buy the apartment or house once the lease expires, whether you can afford to or not. The main difference is that the latter comes with the legal responsibility to buy the apartment at the end of the contract, which means that you may face certain consequences if you back out of the contract when it falls due. It is therefore important to think long and hard before you sign a lease-purchase contract. Lease-option contracts are often more favorable to the renter, since they are more flexible and do not come with any risks for a lawsuit if the renter is unable to buy the house or apartment when the lease expires.
There are many reasons why this kind of agreement may be more beneficial to you compared to a traditional rental contract. This agreement can be ideal for those who plan on staying in one place indefinitely. If your end goal is to buy your own place but you don’t have enough cash to make a purchase, a rent-to-own contract is the next best thing.
There may be a few drawbacks to signing up for a rent-to-own contract. For one, you may be expected to pay a bigger initial deposit if a percentage of that is applied to the purchase price. This is because renters are required to pay a usually non-refundable upfront fee. Also known as the option fee, this is basically the security that gives you the option to buy the house later on. While the exact amount is negotiable, you can expect to pay from 1% to 5% of the purchase price in option fees.
This type of agreement may also come with responsibilities not found in a regular rental contract. For one, the lessor may also include in the agreement that you are required to pay for and maintain the property during the rental period. This may mean added expense that could eat into your budget.
Learn more about rent-to-own rental agreements and other real estate options that are open to you today. We buy properties without the hassle of third-party brokers, lenders with lengthy paperwork, and banks notorious for delayed approvals. If you are thinking of selling your own property so you can look for rent-to-own units in Orange County, CA, we can help. Get in touch for a free quote and start looking for that amazing new space.