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What is a Rent To Own Home?

Rent-to-own homes are a type of housing agreement in which a tenant rents a property from a landlord, but also has the option to purchase the property at a later date. The agreement typically lasts for a fixed period of time, usually one to three years, during which the tenant pays rent to the landlord. At the end of the rental period, the tenant may have the option to purchase the property at a predetermined price.

The rent-to-own agreement typically requires the tenant to make a down payment or pay an option fee that is credited towards the purchase price if they decide to buy the property. This fee is usually non-refundable if the tenant decides not to purchase the property.

Rent-to-own agreements may be advantageous for tenants who are not yet ready to commit to a mortgage, but want to work towards home ownership. It can also be a way for those with poor credit histories to build up their credit and improve their chances of securing a mortgage loan in the future. However, it is important to carefully review the terms of the rent-to-own agreement before entering into it, as they can be complex and may come with certain risks and drawbacks.

What do I look for in a Rent To Own home?

When considering a rent-to-own home, there are several factors to look for to ensure that you are making a good investment. Here are some things to consider:

  • Price: Make sure the purchase price is reasonable and comparable to other similar homes in the area. It's important to have an appraisal done to ensure you are paying a fair price.
  • Rent and rent credit: Determine the monthly rent payment and the percentage of the rent that will be credited towards the purchase price. Make sure that the rent is reasonable and affordable for you, and that the amount of rent credited towards the purchase is enough to make a meaningful difference in the purchase price.
  • Contract terms: Carefully review the contract terms, including the length of the rent-to-own agreement, the option fee, and the terms of the purchase agreement.
  • Property condition: Inspect the property thoroughly to ensure that it is in good condition and that any necessary repairs have been made or will be made before you take ownership.
  • Location: Consider the location of the property, including its proximity to schools, shopping, and transportation. Make sure that the location is suitable for your needs and that the property is in a desirable neighborhood.
  • Legal issues: Ensure that the property is not involved in any legal disputes or encumbrances that could affect the purchase.
  • Exit strategy: Have a plan in place if you decide not to purchase the property at the end of the rent-to-own agreement. Know your options and the consequences if you do not exercise your option to purchase.

How do I buy a Rent To Own house?

Buying a Rent-to-Own house can be a complex process, but here are the general steps involved:

  1. Find a rent-to-own property: Search for Rent-to-Own properties in your area through our website, classified ads, real estate agents, and other resources.
  2. Find Investor/Investment Company: You may also be looking for an investment company, such as Home Equity Partner, Divvy Homes, HomeLight, Verbhouse, and Trio. The investor strategy is to provide relief to the home owner in Pre-Foreclosure, by purchasing the home and paying off their loan balance. The investor, then signs a Rent-to-Own agreement with you as the new buyer.
  3. Review the terms: Carefully review the terms of the Rent-to-Own agreement, including the purchase price, monthly rent, rent credit, and agreement terms.
  4. Inspect the property: Skip if using an investor, as they will do the inspections. If not, inspect the property thoroughly to ensure it is in good condition and that any necessary repairs have been made or will be made before you take ownership.
  5. Make the Payments: Ensure you make the Rent-to-Own agreement payments on time as specified in the agreement terms.
  6. Obtain financing before the end of the Rent-to-Own agreement: Determine how you will finance the purchase. If you need a mortgage, start the application process early to ensure that you can secure financing by the end of the Rent-to-Own agreement.
  7. Exercise the option to purchase: If you decide to exercise your option to purchase the property, notify the seller in writing and pay the option fee and/or down payment as required by the agreement.
  8. Close the sale: Work with a real estate attorney to review the purchase agreement, negotiate any necessary terms, and prepare the closing documents. Once all the documents are signed, you will take ownership of the property.

It's important to work with a real estate attorney throughout the process to ensure that your rights are protected and that the contract is legally sound. Keep in mind that the process of buying a rent-to-own home may be different from a traditional home purchase, so be prepared to do some research and seek advice from professionals as needed.

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