Considerations of Renting-to-Own?
Owning a home is a goal that takes years of budgeting and financial responsibility in order to keep your credit score high. A rent-to-own contract is slightly different to a normal rental or purchase contract. It stipulates the rental terms, where a portion of the monthly rental goes towards purchasing the home at a point in the future.
Benefits of Renting-to-Own
If qualifying for a mortgage is a problem because of moderate finances or credit matters, a rent-to-own agreement might be your best bet. These are not popular in the Bahamas but with the cost of real estate becoming prohibitive for most, it is a viable option that many will be forced to consider. This gives you time to save up for the official purchase of the property in the long run. A rent-to-own kind of contract can be beneficial for both the seller and the buyer, reason being the landlord may want to sell in the future and come across a tenant who wants to buy but needs time to get their finances and credit score in order. It’s a lucrative situation.
The Risks
Choosing to rent-to-own a property will put you at a disadvantage of possibly paying more in monthly rental than you would pay in a normal rental contract. In those extra fees, you may be thinking you are paying more towards purchasing the property, but in reality, you are not. This extra cost can cover mostly just a down payment of the actual purchase.
Terms of a rent-to-own agreement may include security deposits, application fees and 2 months rental upfront just like any other property agreement, so you can’t get out of those general terms easily. Another risk may include maintenance and repair expenses. Landlords would not want to be the ones paying for repairs for property they plan on selling. These terms are included in the contractual agreement, stating all other expenses that will be the tenants.
How It Works…
The contract will include the property purchase price, meaning when the buyer is ready to purchase the home, they will pay that agreed price. If the value of the home goes up over the years, it works in the buyers favour because their property expense will stay the same as what is in their contract with the landlord. Even though the contract has a specific amount for monthly rental, the buyer will generally pay an extra non-refundable amount.
If you have unstable credit, rent-to-own is the safest option for you. Less pressure to pay high out of reach amounts on purchasing property straight away. Before you decide on this kind of agreement, or any other, research the market on rental types that suit your budget. Don’t rush into something that will negatively affect your finances in the long-run. Be on the look-out for scammers. Not every cheap deal should be considered. Open up to doing inspections and thinking about your investment, whether it is a waste of your time or perfect for your future home needs. Make sure you know what you are signing before the ink dries. You don’t want to be stuck in a bad decision for a long time and waste your time. Get a professional attorney to review and give you feedback or advice on the agreement then decide on moving forward or not. Remember the ball is always in your court, especially when it comes to opening up your pockets.