Rent To Own
Dockrey Apartments has offered several properties as Rent To Own, Properties from our selection, and, working with the tenant/purchasor, Properties the tenant/purchasor has found from real estate listings that we have purchased for the tenant/purchasor. Both types have proceeded well, and the resident tenants/purchasors are very happy in their homes. There are many preconceptions, misconceptions, and much misinformation available about Rent To Own property, some of which comes from otherwise reputable sources, some from Urban Myth.
The information on these pages will help dispel the misconceptions about Rent to own, and help you decide if Rent To Own a home is for you.
What Is A Rent To Own Home?
The term Rent To Own can also be; Lease/Purchase, Lease With Option To Purchase, Rent To Buy, or many other terms. Rent To Own Homes have become a popular way for the owner of a home to sell it to a potential buyer, and for a buyer to secure an otherwise unreachable home. Although it is much like owner financing there are some common differences.
Buying a Rent To Own Home typically begins with a lease period and includes an option to purchase the home at the end of the lease.Although there is no standard for a Rent To Own Home Agreement, many contracts contain common provisions. In general the agreement allows a tenant to become a homeowner if certain conditions are met.
At the expiration of the lease period the tenant has the option to purchase the home for a specified amount. Financing the purchase at this time requires the tenant to secure a loan through a bank, mortgage lender or other outside source.
Rent to own (real estate)
©Wikipedia, the free encyclopedia (Rent to own homes)
Rent to own is a real estate term relating to a real estate agreement which is comprised of a rental lease and a purchase agreement where the tenant has the option to purchase the property at a fixed price at a specified point of time in the future. It is also known as lease to purchase option, lease option, owner financing or lease-to-own.
The lease is a typical rental lease where the property owner, the lessor, allows the other party, the lessee, to occupy the property in return for a monthly payment. The option to purchase the property usually states the price at which the property is to be bought and the date at which the tenant is able to exercise the option.
Rent to own contracts typically become more popular as landlords use them as a way to find good tenants. The seller entices the tenant by having a specified payment as a credit towards a down payment on the house, giving the tenant time to rebuild their credit if necessary.Canadian Information, rent to own.
The Option To Purchase
The Option To Purchase can be contained within the Rent To Own, Lease Purchase Agreement, or exist as a separate contract. This provision normally stipulates the tenant/buyer's right to purchase the home for a specified amount at given time, usually the end of the lease period. The fee attached to this the Option Payment.
The Option Payment
The Option Payment is partly paid at the beginning of the lease period but should not be confused with a Rental Security Deposit. The Option Payment is a fee paid for the right to purchase the home. It is not refundable. It is applied as a credit towards the purchase price of the home.
This example illustrates a home, rent to own for $140,000.
A 1% initial Deposit equals $1400. This amount is paid at the time that the lease begins.
In this example the Option Payment is calculated to add to a 5% deposit over two years, ($140,000 x 4%)/24 = $235 per month to be credited towards a down payment on the home when the buyer purchases it.
The monthly Rent Payment on the home in this example is $920. The total monthly commitment is $1155
At the end of the 24 month lease period the tenant/buyer would have the option to purchase the home for $140,000.
Both the tenant/buyer & Landlord/Seller have expected that market movement & improvements by the buyer/tenant to their home have improved the value of the property to much above $140,000. in this example to $150,000.
During the lease period the tenant/buyer has built a total Down Payment Credit of $7,040. and equity in the property of $10,000. At this time the tenant/buyer would need to secure financing for $132,960 to purchase the Rent To Own Home.
95% of the asking price, 88.6% of the lender's valuation of the property
The tenant/buyer has proof of their ability to pay the mortgage, and the additional amounts for unforseen repairs taxes insurances so gaining a mortgage loan is simplified