MAXIM BAGINSKIY
REAL ESTATE BROKER / INVESTMENT ADVISOR
“PLATINUM“ PRE-CONSTRUCTION BROKER
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MAXIM BAGINSKIY - REAL ESTATE BROKER / INVESTMENT ADVISOR
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Rent To Own

 

 

Usually it is 3% of the home’s price, sometimes less, besides that usually there is an ability to pay this amount not immediately, but, for example, for 6 months. During these three years, you'll pay the rent as a rule a bit smaller than if you had just rented the house, plus each month you will add $ 300 to your deposit. The Rent To Own contract usually provides for the possibility of buying a house in any year from the 1st to 3rd, there are contracts even longer. As can be seen from the table, within 3 years it will be more money on your deposit than necessary to close the deal.

                                 After 1 year     After 2 years       After 3 years

 

House price

 $        367,500

 $     385,875

 $       405,169 

Monthly payment in addition to rent

 $            300

 $         300

 $          300 

Accumulated money

 $            3,600

 $         7,200

 $        10,800 

Accumulated money + deposit (3%)

 $          14,250

 $        17,700

 $         21,300

Required downpayment

 $          18,375

 $        19,294

 $         20,258

You must add to make a purchase

 $            3,750

 $          1,069

 $        - 1,567

 

Do not forget also that when you buy the real estate you have to pay for the registration about $ 1000 and land transfer tax, which is not large for the first time buyers, as 2000 is returned by the government. In the example above, given to purchase in 3 years, it will be 2,500.

 For my part I will gladly help you to purchase the house with the Rent To Own program, in addition there is the possibility of buying a house or apartment directly for the client, taking into account his wishes.

RENT TO OWN.

Profitable or not?

Many have heard about the program Rent To Own. Which is becoming more popular. I get a lot of calls with requests to explain how this program works. In this article I will try to tell as much detail as possible about this program. 

This program is interesting for both home buyers and investors. In this article I want to consider the benefits of buyers, to those who want to invest in such transactions, I would recommend to visit the section of my web site under RENT TO OWN (Investor’s point of view) topic, you will be pleasantly surprised to see  examples of what ROI (return on investment) is in question.

Property prices are rising and many are faced with the situation that it is very difficult to save money for a downpayment, as long as the money is being accumulated, the prices are up and again the saved money is not enough to make the initial payment. Besides, some had financial problems in the past (bankruptcy, etc.) and though a person has a stable income at the moment he can’t obtain a financing for the property purchase in the next few years. Besides, the potential buyers of this program are young families who need their own homes, but while only one of the spouses is working they can’t qualify for mortgage and there is a problem with the savings also.

So what is suggested by the Rent To Own program?

Move into their own home even today making just an insignificant deposit.  Fix the price of a house at a certain level and postpone the direct transaction for a period of 1 to 5 years. Not apply to the bank for a loan. Many people are worried that before the direct purchase and sale transaction the actual proprietor of the house is its owner. But are you a rightful proprietor if you buy the house in the usual way? The answer is no. Until you have completely paid off the loan your home is mortgaged by the bank and, in case of dereliction of obligations, you will lose the house. Almost the same happens in the case of the transaction done under the Rent To Own scheme. You formalize the contract the same way, but this time not with the bank but with the direct owner of the house. Both sides of the contract have obligations: You have to make payments in time, the owner of the house has to reissue the house for you in the specified by the contract time. Such contracts are made in the presence of a lawyer and are fully lawful.

Many also worry that in the case of purchasing with the Rent To Own scheme they will finally pay for a house more than its initial price. Yes, that’s right, but don’t you do the same when you purchase in the usual way? As the lion's share of your monthly payment goes to interest payment to the bank that issued you a credit. Do you know that buying a home for 350,000, and entering into the loan with a 5% downpayment, only for the first five years you will pay the bank almost 47,000 just wasted interest, while I take the perfect financing (fixed rate 2.99%), which is offered by the best banks and only for people with excellent credit history.

Let's look at how the Rent To Own program works in figures.

For example you buy a house that now costs 350,000. We will consider variants of buying-out in 1-2-3 years. When making a contract you will need to make a security deposit (which at reissuance will go into your downpayment).