Rent to Own with appreciation + Equity Building

4 Replies

Hi All!  Instead of doing a typical rent to own would you be on the mortgage with your landlord to gain home appreciation if there was insurance built in your landlord will not default?    

Hi, I'm a bit confused on what exactly you're asking. It sounds like your talking about doing a wrap around instead of a Lease Option aka Rent to own. Typically the tenant-buyer in a LO isn't able to qualify for a mortgage, so that's why he records the option to buy at a future date when he will be able to qualify to purchase the home at the negotiated price. The mortgage is getting payed down during the lease period, hence the tenant-buyer growing the equity. If you're concerned that the owner will be skimming the rent, it's advised that you use a payment company to send rent payments directly to the lender. Hope this helps.

Thanks for the reply!  You are correct the tenant-buyer would not be able to qualify on his/her own.  That is why an investor would come in and get the mortgage qualified.  As long as the tenant has good credit this is possible.  This would ideally be for young professionals not quite ready to buy but want appreciation in the home. 

Hey Daniel - I'm curious about this, too! Let me know what you find out.

Hi @Daniel Savage

Hhhhmmmm..... see if this answers your question, I can only answer this on what we do in our business.

We (or could be the "investor" in your example), are not going around buying houses for cash and then turning around and RENT TO OWN'ing them out to buyers who aren't able to qualify for a loan yet.  We are tying these homes up with a contract (so that we have equitable interest) and once we do we are soliciting it for "RENT TO OWN" buyers.  The tenant/buyer locks the price in when they sign the lease (with our atty).  So the tenant/buyer gains in that their price is locked in as values appreciate.  The seller benefits in that they are getting a price slightly above market value.

There's a bunch of ways that I could have taken that so hope that answered your question.  Hope that helps!

Chris Pre

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