Wanting to own a home but not having the funds for it is a reality for many Americans. Muzammil Khan was once among them, but he ultimately managed to own a $171,278 property in only 3 years.
His secret? A rent-to-own approach to real estate.
Here, we're going to talk about rent-to-own homes and what they mean for both buyers and landlords. Read on to learn why this alternative real estate investment strategy works.
What Are Rent-to-Own Homes?
Rent-to-own approaches to homeownership are ideal for any first-time home buyer without a lot of down payment money. In these agreements, the owner and renter enter into a deal where the renter commits to living in a property for a set length of time. Once the lease runs out, they'll be given the option to buy it from the landlord.
Basically, what starts as a basic lease eventually moves into an opportunity for landlords to make a sale.
All rent-to-own agreements are different. In some cases, a percentage of the previous rent payments goes toward the purchase price of the home at sale time. In other cases, landlords might not offer this option.
Some agreements give renters the right to choose whether they want to buy the home after the lease ends. Others require the person to buy the home at the end of their rental period.
Basically, you just need to negotiate with the rent-to-buy tenant ahead of time and make an ironclad lease.
Why Do Renters Take This Approach?
There are many reasons that tenants take this approach to buying a home:
- They may be able to credit a percentage of the rent towards the final purchase
- They have more time to save enough money for a down payment
- They have a higher likelihood of being approved for a mortgage
- Paying rent regularly can help their credit score
- They're more flexible than traditional home purchases since there are more chances to back out
How Does Offering Rent-to-Own Benefit Landlords?
As a landlord, you'll also get several benefits from a rent-to-own property. It's important to note that you'll be able to negotiate whatever lease you want with the tenant. You can make passive income collecting whatever rent you deem fair, and if you choose to require a purchase after the lease expires, you can include that in your legal contract.
One huge benefit landlords get from rent-to-own is lower vacancy rates. You can set up longer leases since tenants plan to be there for several years before buying. This means you won't need to find new tenants every time an annual lease expires.
You also will get higher-quality tenants since people will want to take care of their future homes.
Regardless of your goals, a reputable property management company can help you make the most of these possibilities.
Invest in Real Estate the Right Way
Now that you know the basics of rent-to-own homes, it's time to begin profiting off your rental property as much as possible. We're committed to helping you make passive income in Lafayette, Louisiana with top-notch property management services. Get a free rental analysis to learn how much you could profit off your property today.
