Why Rent to Own Homes are a Great Investment for both Landlord and Renter
With a good win-win rent-to-own contract, a lease-to-own home can be a great investment strategy for both the homeowner and the renter. However, like any contract, you should carefully read through the details to make sure the contract doesn’t disproportionately favor one side over the other.
Let’s start out with why a rent-to-own home is a great investment for renters who would like to become homeowners.
For many renters, homeownership is the ultimate dream. Paying rent to your landlord or rental agency each month doesn’t earn you any equity in the home. This is ultimately helping someone else pay off their mortgage, while you achieve no future gains. However, rentals are often a trap that keeps people from attaining the goal of homeownership. It’s difficult to save up for a down payment and improve your credit score and debt-to-income ratio when a large portion of your salary is going toward rent.
Enter a new solution: rent-to-own homes. Rent-to-own homes allow renters to use a portion of the rent they pay each month toward the purchase price of the home. Your rent payment may be a little larger than your standard rental agreement – but with this comes the satisfaction of knowing you are actually investing in your future home.
The major thing to keep in mind with rent-to-own homes is the contractual obligation to purchase the home within a certain number of years. This is generally 5 years. If you do not obtain a loan to purchase after this time, the landlord reserves the right to terminate the lease and you forfeit your funds.
However, the time period is generally long enough to start saving up money and repairing your credit. This allows you to get to a point where you are able to apply for a loan for the remainder of the home cost, and if you used this time wisely, get approved to purchase the home.
Why are rent-to-own homes good for the homeowner?
With a rent-to-own contract, the tenant is serving as more of a homeowner than a renter. This means that if both you and the tenant agree, the tenant will have control over home upgrades, remodeling, and repairs done on the home.
As a landlord, this is a big bonus. You get the benefit of an income as an investment rental property, without the headache of maintaining the home, which can be a big savings for you over time.
In addition, this gives homeowners regular rental payments for the home, for a set period of time. Rental contracts are generally only 12 months in length, but a rent-to-own contract may be 5 to 7 years. This is guaranteed recurring income over the life of the lease.
Rent-to-own homes are a great idea for both parties and can help both homeowner and renter achieve their future goals. Start looking for rent-to-own homes near you today and start your journey.