Are you interested in finding a rent-to-own home? Making the jump from renting to owning a house can be difficult. Finding the large amount of cash for the down payment isn't normally easy when you have rent to pay. But what if you could rent to own instead?
It can be possible to move into a rental property that gives you the option to purchase, but finding such an opportunity can be difficult. Here's how to find rent-to-own homes while avoiding some major pitfalls:
Getting Help From an Experienced Agent
Navigating your way into a rent-to-own arrangement will be more complicated than a normal rental. To make sure you avoid the problems and find the home you want, assistance from an experienced buyer's real estate agent is essential.
Rent-to-own contracts can put you at a disadvantage if you don't understand the process very well. You'll have to make sure you have the financing ready when the option to purchase becomes available. If you don't, you'll lose the extra money you spent on rent. Having someone there who does know the process ensures sure you don't sign a contract that'll work out badly for you.
Despite having assistance from an experienced agent, it can be difficult to even find rent-to-own properties. Some brokerages specialize in rent-to-own programs, making it easier for you to find the home that's right for you.
There are other companies that work with you to find a home that's for sale but not a rental. They'll purchase the property and lease it to you. You'll have the option to buy the home when the contract ends, at the set price agreed, when the contract was signed.
When renting to own, there's always the risk that the home will go into foreclosure. This can happen without the renter realizing there is anything wrong and it will mean that they lose out on the option to buy and the extra money they've spent on rent. It can be very difficult, if not impossible, to claim your money back if this happens. Using an investment company through a rental with the right to purchase agreement can offer more protection.
Finding a Seller for Renting to Own
Your agent should be able to help you find properties that are right for you and that aren't listed as rentals. If a home has been stuck on the market for a long time, the owner might consider a rent-to-own arrangement. This might be something they hadn't considered and will give them rental income from a property that was otherwise costing them.
Sometimes sellers get into a tough financial spot but don't think about alternate options because they are never presented any. It could end up being a win-win for both you and the landlord.
Landlords That Want to Sell
If your agent can locate landlords that are looking to sell, this type of agreement could work well. Perhaps they started renting out the home because it wouldn't sell and they still want to sell now.
If such a landlord can be found, they'll likely be very happy to enter into a rental arrangement. They will get a tenant who's looking after the home, they will get more rental income and they will sell the property in the end.
Following proper guidance, however, is key with rent-to-own properties. Use these helpful tips when renting to own a home.
Pre-Foreclosures Could Be an Option
While you can't set up a rental agreement with a home that is already in foreclosure, you can if it's in pre-foreclosure. This will allow the owner to avoid foreclosure and pay the mortgage, with an eventual sale. Sites like Foreclosure.com can offer a large number of potential properties for you to investigate further. You may find properties in pre-foreclosure, as well, by looking at Zillow.
Zillow, via an agreement with Realty Trac, displays properties where homeowners have missed mortgage payments. While with many of these properties the homeowner has fallen on hard times and quickly recovers, there are instances where they do not. Either you or your agent could seek out one of these homes and attempt to contact the owner to see if there's any interest in renting to own.
You'll have to offer terms that the seller will be happy with, which could mean spending more. And there's still the risk that the home could go into foreclosure, so you should hire a lawyer to make sure the contract is in your best interests.
Other Potential Options
Asking friends and family could be another way to find a seller willing to rent. You could make a post on social media sites like Facebook or neighborhood sites like Nextdoor.com to find someone who might be interested.
However, you could be opening yourself up to more risk when advertising. There are rent-to-own scams that could see you spend thousands more on a home, only to find you aren't able to buy. Be very careful about entering into a rent-to-own agreement no matter how you find it. Get any agreement checked by an expert you can trust before you sign.
While renting to own a home is a very popular topic, finding these properties is not that easy. It's going to take patience and perseverance to find a lease-to-own agreement that you'll be happy with. Above all else, make sure you have an attorney look over any rent-to-own agreement you're going to sign. It's very easy to get yourself into hot water when getting involved with renting to own. Your extra due diligence will pay off in the long run!
Bill Gassett is a nationally recognized real estate leader who has been helping people buy and sell MetroWest Massachusetts real estate for the past 33 years. He has been one of the top RE/MAX REALTORS® in New England for the past decade. Gassett works for RE/MAX Executive Realty in Hopkinton, Mass. In 2018, he was the No. 1 RE/MAX real estate agent in Massachusetts.