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real estate rent option to buy?
what does" rent with option to buy" actually mean? And how does this usually work? Is it a good idea for someone who cant afford to buy the home yet but would like to after renting it for awhile?
Public Comments
- Option to buy means you rent it for a while with the intention of buying the property in the end. Your rent money is not wasted because it is applied to the properties value, or mortgage. If you dont have such great credit, or dont want to deal with loans this is a great way to buy real estate, a home. We just did in Puerto Rico!!!! Option to buy and all. Love it! Example rent for a year or two, then at the end of that time you buy. Its cool cause you can deal with the owners directly sometimes... This is not real estate advice, but I tell ya cause we just did this. Good luck!
- It means you get a contract that will screw you in the end. Why? Because your "rent" does not get you any equity in the property until you can come up with a loan to "buy" the place. You miss one rent payment and discover the "option" is lost. And over time, your landlord has more incentive to sell to someone else, because the price of the property will have risen. So, if you do this, have your own lawyer inspect that contract. Make sure it gives you adequate rights and protection.
- This is in Michigan I'm not sure about other states. So, let's say you have a year lease. You need 1 1/2 security deposit, first month's rent, plus the option for the purchase after your lease expires. You negotiate how much the option is. It is an option so if you decided not to purchase the home after the lease expires you don't have to after the year is up. Once you buy the option depending on what you agree with your landlord a portion will be set aside each month from your rent and used as a down payment when you plan to purchase the home. If you decide not to purchase the home the landlord keeps that portion. You can negotiate up front on how much the sales price will be, but the market might decline which means you will pay more then what it's worth or the market could get better and then you got a steal! It's your call! Hope that answers your question.
