Rent to Own
October 25th, 2006 Real Estate
A lot of people are quite familiar with the term “rent to own.” Prime Time, Rent A Center and other such places have actually built an entire empire upon rent to own merchandise. However, the buy usually winds up paying twice the amount of what the merchandise is actually worth to begin with. This can be great for people who have credit problems, but the majority of people would prefer not to go this route. Of course, this is also true when someone wants to purchase a home on the rent to own basis.
While rent to own may be good for a short period of time, in the end it is actually a very expensive way for a person to buy something. This may sound like a good deal for a few weeks though, especially since the person is only being charged a few dollars each week. However, a person usually signs a 15 to 20 month contract, which is where the company actually makes its money. So, while you may only be paying a few dollars per week, the total cost quickly adds up to what is usually close to twice the amount that the item cost to begin with.
When you are renting a house, not only will you have to pay the rent bur you will also have to pay any applicable sales tax too. This is why rent to own real estate also has disadvantages, just like other rent to own merchandise does. While this could be great for someone who does not have good credit, a person should still understand that they will be paying back more than what the mortgage was to begin with. Of course, if a person chose to simply purchase a house they would still have to pay back the mortgage. However, this would not cost nearly as much as if a person had chose to buy a house on a rent to own basis.
Most of the time these rent to own homes are placed on the marketplace by their owner. Therefore the renter will be dealing directly with the owner. In this manner the lease will begin as a traditional lease then over time it will proceed to a rent to own basis if the person decide that they want to keep the home. At this point the renter and the owner will need to work out an agreement. This agreement will take place over a period of several years. While some owners are quite flexible and will work with the renter so that they get the price they want from the home, other owners will charge the renter a huge price in order to make a hefty profit.
For people who have bad credit and are thus unable to get approved for a loan, this type of rent to own agreement would be their next best option. While some people still do not like to do this, other people will discover that this is a better option for them than renting an apartment. This is because when you work with a rent to own home a person is actually paying money toward their home instead of just paying rent. Sometimes this is fine but at other times a person needs to really investigate this option before agreeing to it. In this way the person will be able to be certain of the price that they are going to pay for their home and for how long they will be paying this price.