I hear this question almost weekly "Do you have any rent to own properties?"
"No" Where is everybody hearing about rent-to-own a home?
I had to google it to find out details because I havent ever heard of a seller doing this on Kauai.
How it works (via google):
A renter rents a house for 3 years and at the end of the 3 years gets to decide if they want to pursue purchasing the home. Right now a small-average house on Kauai is about $400,000. Lets say the house rents for $1,500 the renter-to-own will pay $1,800 a month with the added $300 rent credit. Then there is the option fee which most people dont realize exists. The option fee can be looked at as an earnest deposit lets say its $10,000. After the 3 years the renter would have $10,800 in rent credits that would be used as a down payment. Along with the option fee money that would be $20,800 used as a down payment. At the end of the 3 year period if the renter cannot buy the home or decides not to the owner keeps all of the money. There would also be a contract outlining the details.
With that explained renting-to-own does not look as easy as it sounds. In other words immediate cash payment is involved in a renting to own situation. This could be good for a person who has money but cannot get a loan immediately. This type of purchase seems very risky. There are benefits and drawbacks to both buyer and seller.
In my opinion the drawbacks outweigh the benefits. Buyers: If the seller defaults on their mortgage and the home goes to foreclosure you might loose all of your credit and option money and have to moveout. Sellers: If you lock in at a sales price of $400,000 with the renter then in 3 years the home is worth $500,000 you "loose money" as we say on Kauai literally.
When it comes to Renting-to-Own a home on Kauai I say Myth!
Although renting-to-own might not be a good option on Kauai it did point out a good strategy on how to save for a down payment. Putting aside even $200 a month when you pay your rent could benefit. In 2 years $4,800 is enough to pay for closing cost and more if you plan on getting a USDA 0% down loan.
For more information on Kauai real estate and buying a home on Kauai please feel free to contact me. Aloha.
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