The concept of a Rent To Own program sounds really good.
BUYER: A set amount of each months rent is set aside as a down payment on purchasing the house. This builds equity and is a form of saving. The period of renting allows time for credit repair(contesting negative entries on the credit report). This period also allows the establishment of valid accounts that show a history of full on time payments(three or four accounts that show a history of good credit management make a huge difference).
Seller: Today's market has 30% fewer buyers. Tightening the jumbo market on the high side, and raising the bar on the sub-prime side has made a tremendous difference over the past six weeks. This program allows a seller to market to a larger pool of buyers(applies when the seller does not need to cash out of the property short term). Many sellers feel that a lease purchase program allows them to realize a higher net on the sale. Some investors liked this because so few purchasers ever close, allowing for another program at a higher price. For several years this was a good hedge on keeping up with appreciation.
My problem with Lease Purchase in this market: Due to the historical abuse of rental property most seller, investors have had to protect themselves. Once you raise the initial capital requirements to move in with higher deposits, added amounts for children and pets, add in higher first and last months rent needed you are looking at near enough to purchase the place. The amount down is about enough for closing costs, and the monthly rent is about the cost of a mortgage on the house. Plus the fact that after twelve months so few renters have actually elevated themselves to the point of qualifying for credit this does not seem like the best use of the hard to come by cash from a buyer. This leads to frustration and ill will from the renter, and more wear and tear on the seller, investors property which raises the rates for the next renter.
Solution: I have found a lender that has experience with lease purchase programs. When marketing a potential lease purchase I forward information on the property to the lender and use their flyer as a hand out. I put the buyer in touch with the lender to provide a hedge on the buyers ability to close, and that they have a specific plan that will make it happen. In todays market the seller gets a pre qualified buyer at todays market value. Essentially this is like a delayed closing. Inspections, survey, etc are all handled up front. Could this be a win win scenario?
Principal Realty Group
95 Arco Dr.
St. Charles, Mo. 63303
866-456-1862 Toll Free
Remember! Consider the difference between a buyer's agent and the seller's agent.