One of the best ways to buy a property at a price that is not influenced by market trends is the rent-to-own option.
What is rent-to-own?
Lease-to-own means is a situation where you agree to purchase a property at a future date, based on a value specified in the agreement, and in the meantime you live in the property on a rental basis. Other terms used to refer to this form of purchase agreement are lease-to-own or lease-to-own option.
What is part of a lease-to-own agreement?
The rent with option to buy is made up of two sections. One section details the terms of the lease and the other section has the option to purchase.
The lease section specifies characteristics such as the lease amount, the lease period, the date the amount is due, etc. In the purchase section, you can see the details mentioned about the opportunity to buy the property, at a specific time in the future along with the price.
What should you know about a lease with the option to buy?
In a lease-to-own agreement, three factors will apply. These are the rental premium, option fee, and rental credits.
The rental premium is an amount you must pay towards the down payment on the property. It is an amount that is a little more than the rent. Another thing that applies to the down payment is the option fee. However, you should note that the option fee is non-refundable, in case you decide at the last minute that you do not want the property. A rental credit is a portion of the rental payment that is also contributed to the down payment. This is added by the seller to the down payment each month.
Benefits of renting with option to buy
There are many benefits to a rent-to-own situation for both the buyer and the seller.
As a buyer, your profit due to changes in market value will not affect the price you pay for the property. So if prices go up, you don’t have to pay more, just the same amount that was put into the deal.
You make down payment contributions through rental premiums, option fees, and rental credits, reducing the total amount you must pay at the time of purchase. This is a real advantage for you when it comes time to pay.
Finally, if at the last minute you decide not to buy the property, you can. There is no binding option in the purchase. Although all the money paid for the down payment in such situations becomes a loss for you, you can get rid of a purchase, which you also think is not correct at the last minute.
Sellers benefit from having someone who will take really good care of their property, as they will own the property in the future. The seller receives money not only for the value of the home, but also in the form of rent, which is an additional source of money, until the purchase is made. In case the buyer finally decides not to buy the property, the money taken through the option fee, the rental premiums do not have to be refunded.
A look at the other side of the coin
As someone who enters into a lease-to-own agreement, you need to know the other side of this situation. As a buyer, you will lose your rental premium and option fees, should you ultimately decide to back out of the purchase. In the case of the seller, if market prices suddenly went up, he would be on the losing end, as the price set for his property would be significantly lower.