Rent-to-own homes provide some additional options for real estate transactions which can benefit both parties in today's real estate market. A rent-to-own transaction can allow a potential buyer who may not have the capital, or credit needed to buy a house to enter into an agreement to buy a home/property. By drafting a fair contract that can protect both the seller and buyer, you can generate income for the seller and savings for the buyer while securing viable interest in the property.
In a traditional rent-to-own agreement the landlord/seller usually requires a deposit. Depending on the terms of your agreement; this deposit can be waived, or rolled over into your monthly rent-payments. A deposit on a rent-to-own is often called option money to secure the tenants/buyers option to purchase the property at the end of a set timeframe.
The amount of the deposit/option fee usually is between one and five percent of the property price. The purchase price along with rent requirements are usually agreed upon by both parties and written into the rent-to-own agreement. This will lock down the price and creates security for both parties.
While the tenant/potential buyer rents the home, the traditional rent goes straight to the seller-landlord, as if the tenant is in a typical rental agreement. In some cases, a rent premium can be negotiated instead of a deposit, or in addition to the deposit, which will be applied to the purchase of the home.
Most rent-to-own contracts are fairly short term of one-to-three years. However all terms of the contract are negotiable, so a longer time frame can be created if it works for you. In all rent-to-own contracts there must be an agreed upon price for the sale of the property, which is usually established in the rent-to-own agreement. There are many other details that go into a rent-to-own contract and both parties should have either legal counsel or a professional real estate agent help with the wording and drafting of the contract.
Rent-to-Own opportunities can be a win/win for both parties. However, it is important that you both research and know your rights and limitations before you sign on the dotted line. Always beware and be wise.
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