Advantages and Disadvantages of Rent-to-Owns

 

ADVANTAGES

DISADVANTAGES

SELLER


TENANTS TYPICALLY PAY HIGHER
THAN MARKET RENTS


TENANTS LOOK AFTER PROPERTY BETTER BECAUSE THEY MAY OWN IT IN FUTURE


DEPOSITS ARE TYPICALLY NON
REFUNDABLE IF DEFAULT


GET AN UP FRONT DEPOSIT


ON TIME  PAYMENT OR TYPICALLY NOT CREDITED
TOWARDS PURCHASE


AGREEMENT CAN BE WORDED SO BUYER IS RESPONSIBLE FOR REPAIRS AND MAINTENACE


FINAL PURCHASE PRICE IS
GUARNETEED


DELAY IN GETTING PROCEEDS OF SALE- SELLER MAY NEED $ ASAP


WHAT IF THE BUYER DOES NOT
QUALIFY FOR THE MORTGAGE AT END OF TERM? MAY NEED TO RE RENT OR TRY TO SELL


CANNOT SELL TO ANOTHER BUYER EVEN IF BETTER OFFER

BUYER


GOOD FOR PEOPLE WITH CREDIT
ISSUES OR NEW RESIDENTS TO THE COUNTRY


FORCED SAVING PLAN


GOOD FOR NEWLY SELF-EMPLOYED
AS BANKS WANT 2-3 YRS HISTORY OF INCOME TO QUALIFY


FREE TO DO RENOVATIONS OR
IMPROVE VALUE OF THE HOME


DEPENDING HOW THE AGREEMENT IS WORDED THERE MAY BE PRICE PROTECTION FOR THE BUYER IF THE VALUE HAS GONE UP SINCE THE INITIAL AGREED UPON PRICE


RENT WILL NOT BE RAISED
DURING THE AGREEMENT EVEN IF RENTAL RATES ARE ON THE RISE


IF THE BUYER CANNOT QUALIFY
FOR A MORTGAGE AT END OF TERM THEY RISK LOSING THEIR DEPOSIT


NEED TO PUT BUDGET PLAN IN
PLACE (HARD FOR MANY)


IF MARKET DROPS BUYER IS
STILL ON HOOK FOR AGREED UPON PRICE