Rent to Own Properties? truth or myth

By
Real Estate Agent with Kauai Dreams Realty RS-75011

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):Wailua House

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!

 

money treeAlthough 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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Kauai Dreams Realty

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Kela Caspillo (s) Realtor Sales Person

4-1435 Kuhio Highway, Kapa`a Kauai

Cell: (808) 652-6173 Office: (808) 822-7774

Email: kelacas17@gmail.com

 

 

 

 

 

 

Comments (2)

Fred Griffin Tallahassee Real Estate
Fred Griffin Real Estate - Tallahassee, FL
Licensed Florida Real Estate Broker

     Some Investors with questionable ethics use "Rent to Own" to make a lot of money.  They know that the person who cannot qualify for a mortgage now will probably not qualify a year from now.  The Tenant will lose whatever money they paid up front for the Option.  The Tenant vacates, the Investor finds another Lease to Own candidate, and does it again.  It is legal, but highly questionable.

     See an Attorney, or a CPA, or both, before signing one of these deals!   ---

Mar 25, 2014 09:39 AM
Julie A. Black
KAUAI DREAMS REALTY Kauai Real Property Specialist - Kapaa, HI
CLHMS, CRS, GRI, Realtor, Broker

Yes, I agree Myth at least here on Kauai.

May 06, 2014 12:15 PM

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