Tag Archive for 'lease option'

Everything to Know About a Rent-To-Own

Published on April 18, 2011 in General. 0 Comments Tags: , , , , , , , , , , , , , .

 

When the housing market is being difficult to sell a home, one can consider Rent-To-Own as an option. For those that are not familiar, here is a quick run down on how it works.

The process normally begins where the owner of the home puts the property for sale because they may not be able to afford the payments anymore. The home has been on the market for months, and the finances are becoming too much. Now the owner is getting desperate to sell, but doesn’t want to lose any money. This would be the time to consider a rent-to-own option.

Before an agreement, the owner has to make a decision on the sale price and rent they are charging for the house. Both amounts are open to negotiation, similar to a regular sale. The owner must remember that once they sign an agreement, the sale price is locked in until the end of their rental term. The term can be between one and three years. Even if the housing market prices rise or fall during that time, the original agreed-upon sale price is final.

The renter will also pay rent premium and an option fee. The rent premium is an amount just above the typical rent. A part of that money goes towards a down payment. The option fee is a set amount the renter will pay the owner. If, at the end of the lease, the renter buys the home, the option fee converts as a portion of the down payment. If the renter decides not to buy the home, the option fee becomes income for the owner.

Some general tips when choosing a renter are:

  • Make sure to have a thorough contract. The contract should be reviewed by a real estate attorney or expert. A good contract will address any possible issues that may arise during the agreement. The contract should include who will be responsible for home repairs, maintenance and any missed payments.
  • Check the background of the renter. The owner should run a background check on the renter reviewing their credit, employment and salary history.

Advantages

  • If the value of the home is dropping, the owner can lock in the higher price at the beginning of the agreement.
  • The owner can ask for higher rent because of the flexible financing terms.
  • Renters that are looking to own treat a home and community better.
  • If a renter backs out of the agreement, the owner still has the option fee and rent premiums as income.
  • While the owner still owns the home, they can take advantage of tax benefits.

Disadvantages

  • If the value of the home is going up, the owner already locked in the lower price at the beginning of the agreement.
  • If a renter breaks the agreement, the owner is back to paying the mortgage.
  • If the renter doesn’t pay, then the owner needs to prepare for eviction.
  • The owner should regularly check the home to make sure the renter is treating the property well.
  • The seller is still responsible for the home.

Celebrity Foreclosure Justice

Published on June 18, 2008 in General. 0 Comments Tags: , , , .

There has been a lot of press lately about the amount of recent foreclosure filings across the country, with extra fuel being provided by some famous (and infamous) celebrity homes entering the foreclosure process. But is this sparking flames on a fire that has already been contained? And, is all the hoopla justified?

Michael Jackson, the self-proclaimed “King of Pop” almost lost his infamous Neverland Ranch in California to foreclosure. (An investment company stepped in at the 11th hour and took over the loan) Jose Canseco, Ed McMahon, Rep. Laura Richardson of California and Evander Holyfield have properties that are in the foreclosure process. Some are financially strapped and can no longer afford their homes, while others are throwing in the towel and simply walking away.

Some homeowners are walking away from their properties because they owe more than the property is currently worth. Most celebrities can probably afford to lose one property. More than likely, the property up for foreclosure is not their primary residence. Because of WHO they are, they are able to financially recover from a foreclosure loss a lot faster than the average homeowner losing their house to foreclosure.

99% of people go through varying degrees of financial strain in their lives (some more than others). Logically, these bumps in the road of life will hit the rich and famous on occasion. The media jumps on these stories because it sells papers, magazines and boosts TV ratings. The media intimates that if it happening to the rich and famous, we must really be in crisis.

The reality is that only about 2% of ALL mortgage loans are somewhere in the foreclosure process. A majority of homeowners who enter the foreclosure process work out a deal with the lender to save their home from being foreclosed. Some areas of the country are actually seeing an increase in property values and a decline in foreclosure filings. However, these statistics are conveniently left out of media reports – surprise, surprise.

Real estate has always been a reliable investment and will continue to be for a long time to come. In fact, smart and successful investors are buying up the bargains now because they know appreciation is a short time away. It is great time for “buy and hold” investors.

Lease Option real estate investing is becoming a more common strategy for smart investors in this market. A Lease Option investment strategy means signing a lease contract on the property “with an option” to buy with a potential buyer.

There are many details involved in this strategy. It is always a good idea to consult with a real estate attorney before signing any agreements.

A mentor or expert in this strategy can also be helpful in gaining insight into the Lease Option investing strategy. For additional information, see the GuReview.com experts, Andy Heller and James Gage who specialize in this niche.