Rent to Own

14 Replies

I would like an opinion on rent to own properties. I will be moving to Chicago in less than a month and will need a place to live. I currently live in Houston with property I own in Louisiana that is free and clear that I'm renting. I am in need of something in Chicago right away. I thought of rent to own and wanted advice on this option. Thank you

@LaDawn Jones When I went to buy my first house (in Idaho, before the crash), I investigated Lease to Own. My experience was that for someone with good credit, it was a much more expensive way to purchase a property.

The options I looked into required a larger down payment than the mortgage company, and I lost it if I didn't stick with the property. In addition, only a very small portion of my rent would be credited toward the purchase of the property. If someone needs this option to repair their credit, it's a good option to pursue, but be very careful to look at the terms to make sure it is actually a good deal before you jump in.

I know moving is a hassle, but you might consider just renting for 6-12 months and then moving again, once you know the area and where you want to buy. If I'd had to stick with a property I had picked when I first arrived in Houston, I almost certainly wouldn't have found a home in the neighborhood where I ended up, and it almost certainly would have been a worse situation.

@Bryce Christensen do you have any examples of terms you came across that completely ruined the deal for you?

I don't know how well you know Chicago, but I would suggest finding a place to rent. Learning the areas and market then consider renting to own. When renting to own you are paying more than normal rent and can lose out on that extra cash if you deside that isn't the place for you. Good luck and keep in touch.

@Derek Smith The idea was to maintain some of the freedom of renting (we were in college and didn't know where we would need to go after graduation), but hated to continue to pour money down the rent hole without building any equity.

Don't quote these numbers, they are only representative of the relative magnitudes: our 2/1 apt rent was something like $500-600 per month. We found a 3/2 house we considered renting that was something like $850 per month*. The 3/2 lease option deal would have required a payment of something like $1200 per month, and only $200 would have been credited toward the actual purchase. If $400-500 per month had been credited toward the sale (leaving $700-800 for "rent"), then taking the risk of losing the extra would have been justified, because we would have received some sort of return on that money. Because it involved paying extra rent beyond market, we were better off renting the $850 house and saving $200-$350 per month.


The actual end result was the purchase of a 4/2 house with a payment of just under $800 per month on a teaser rate. Once it adjusted up to market, our payments were close to $900. We ended up losing $10k on that house after living in it for nearly a decade (which included the bubble inflating to 2x what we paid for a nearby comp and then bursting), but that's another story.

*We planned to lease one bedroom/bathroom to my sister for $200 per month, so that kept our actual cost close to the same. But when we finally moved into the house, we did not end up having my sister move in and that was probably for the best for other reasons.

@Bryce Christensen

thanks for sharing your story! I've been considering this as a potential option so its nice to hear some insider info on the matter.

Wow, 6 posts on rent to own for an owner occupied place an no mention yet of the "you know which" Act. It's as if 500 posts here were all in vain :)

Lease options and seller financing are always going to be financing options regardless of the new regs. It's still possible to sell and purchase property this way (with limitations and variations by state) and it's possible for the sellers to be in total compliance with the regs.

This discussion is about the feasibility of purchasing with such financing as opposed to renting. Nobody's gotten even close to regulated territory as nobody here is considering offering such financing. It's an exploratory post. You know, where people brainstorm about real estate and financing options.

@LaDawn Jones, I agree with Timothy. Chicago has alot to offer. On top of that, you also have the outskirts that are great to live within, like Blue Island, Oaklawn (southside), Hickory Hills (west), and Maywood (kind of north) just to name a few.

You can find a nice little place to rent inside the city, like in the south shore area or even Hyde park (depending on your budget) and then, just explore and get to know the city from there.

I have a good relationship with some landlords and would be glad to connect with you with them. PM me.

Good luck!

ShaRa

There are creative ways to buy besides traditional mortgages.

1st you need a motivated seller and the right product that you want very much.

Think about resale and get the right school district.

Look at trends of appreciation.

Now @Bill Gulley was referring to new laws such as the SAFE Act, Dodd Frank (DF) law et al, and they are important, but als I believe if you want to get a seller to Owner Finance you (sell on terms that abides by the laws of your state), there's always a way.

The ability to repay rule from the CFBP if Owner Financing needs to be considered. See a RMLO about your choices of Owner Financing, Land Contract or Rent to Own.

See

http://www.consumerfinance.gov/regulations/ability-to-repay-and-qualified-mortgage-standards-under-the-truth-in-lending-act-regulation-z/

And see a lawyer to draft a contract that your motivated seller and you as the cautious buyer can live with.

@Brian Gibbons,

You are right there are ways to do a rent to own without any problems. I spoke with a banker that is high up on the food chain where they service their loans and he open admitted that he does not know how the DF act work.

Joe Gore

Actually, I was commenting as to the rent-to-own strategy, normally with rent credits that is considered a financing arrangement and if leased by a landlord, the deal would then fall under the Acts mentioned as she is wanting to live in the property.

So, in order to "explore" such options, they need to address the issues of the obvious.

Good luck finding a RMLO to sign off on a rent-to-own contract, if the RMLO has a clue they would insist on a different arrangement.

Or, you could find a landlord having a brain phart and take him up on his old rent to own contract and then get all your money back in a couple years living there rent free, from his messing up, that's another option. LOL

K. Marie, I like your new avatar, you keep looking younger and younger, nice pic. :)

Why would you rent to own? Can you not afford a mortgage?

It would be great if the American people had one politician or the ones that created the DF act would go on record and explain the DF act. I can not find anyone that want to step up to the plate.

Joe Gore

I agree with @Bill Gulley , I like the new avatar for @Account Closed .

As to rent to own, @LaDawn Jones , it will be very hard to find one of those because of the Dodd/Frank Act. You might try for a 6 month lease and see how you like the market before spending the extra money a Rent to Own would cost.

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