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"Rent-to-Own?"
Never, unless the Tenant-Buyer has qualified legal counsel thoroughly review the contract, has a thorough home inspection, and approaches the transaction as a formal serious affair.
Historically, rent to own schemes have been on similar levels as Buy Here/Pay Here car sales.
Trying to squeeze a lot of money out of a substandard product that won't move in regular market dynamics.
Quote:
Originally Posted by mathjak107
rent to own can be a pretty crappy way to try to buy .
...
Rent to own is almost always crappy. Opportunistic investors don't want to lose their cash cow.
Take a $1000 purchase deposit on top of market rent +$400/month additional for "equity."
"You don't need a home inspection on this pig." (Don't even ASK about equity money or deposit going into escrow.)
Now you have a buyer/tenant with dreams of ownership who just might take better care of the property.
Of course, after the 1,2,3 year RTO contract, the "buyer" cannot close with funding above market price, or changes their mind, or gets in a financial bind, or divorce, or moves out for a job too far away.
LL/Seller recoups a reasonably maintained unit ready to "sell" again, after clearing thousands of dollars above market rent.
Good attorneys will just not get involved in schemes like this, won't write agreements.
Just like Buy Here/Pay Here car sales.
Car Seller pays $2000 for a heap. Slaps a cheap paint job on it, and spiffs it just a bit.
$2000 down, $100/week. 2 year contract.
Owner pays for a year and loses job, other expenses take the weekly cash, gets separated/divorced and has inadequate funds for weekly payment, whatever.
Seller repossesses car. Rinse and Repeat. Cleans and spiffs it up a bit. $2000 down. $100/week.
Lot owner told me his favorites were people who paid for 22 months on a two year deal, got peeved, and told him he could take his dang car back.
An advantage over RTO House scams: BH/PH is almost always an all cash business.
Prices for existing houses in neighborhoods where we'd be willing to live have outrun the growth of our money, yet again. Fortunately we have some land so we're putting the money there. Going to find out whether we thrive going urban to rural.
Reading the local article how the average family needs to make $100 Thousand a year to purchase a home in our area. With down-payments ranging from $50 thousand or more I am okay with renting.
Any renters love renting??? Be great if more rent to own took off across the US. You live at a place for 5 years then own it I be game.
We are contemplating renting a house next year or year after for almost $2,100 average home mortgage payment in our area. Then looking to buy in 5 more years is the goal.
Anyone enjoy renting? Starting to like not having to own a property have the ability to move around more in the same area to different properties till finding the right one.
Thoughts???
Well, it's going to be a heck of a lot more than 5 years.
I've run the numbers many many times: the rent house owner who borrows money to buy a rent house just about pays their 30 year mortgage and property taxes with market-rate rentals. If they manage the property themselves they'll get a small profit.
Your rent-to-own scheme would have to end with the new owner having paid the profit for the previous owner - if it takes the landlord 30 years to pay off the mortgage while collecting a small profit, it's going to take the rent-to-owner 30 years to pay off the mortgage while generating a small profit for the landlord.
Keep in mind some of the lovely features of renting, unless you are renting a super-premium property:
The landlord will decline to fix anything that isn't well and truly broken and creating an immediate hazard. We spent four years trying to get a 60 year old oil furnace replaced, that was using 4 tanks of oil every winter - after replacement it went to one.
If you find a property you want to buy, or you want to move for whatever reason, it'll probably be with 10 months left on your lease.
At any time the landlord may decide to sell the house to a builder, at which point you're out on your hiney with 60 days notice before the end of your lease term, or any 60 days if you're month to month.
half of all rentals here fall under stabilization.. that offers guaranteed renewals and rents are determined by a board .
that doesn’t mean cheap , it just means the future increases are decided by a city board .
some stabilized apartmentos run 6k a month in manhattan . they are gorgeous….so stabilization can be a game changer .
which is why we have more renters then owners
Look, you constantly reference your experience (experienced investor with lots of cash, New York City, rent stabilized apartment, happy sharing walls and floors, etc.) as if it were meaningful to a wide range of people. You ought to preface all these stories with "of course, our situation is particularly unusual as we live in a place that's unlike the vast majority of the United States, New York City".
opportunities to invest and do better then buying a home and tying up the money in a home exist everywhere.
i found a niche here but i can tell you if i wanted to be successful elsewhere i would find a way .
it would just be done in different ways , perhaps by making connections to get the inside track on tax lien sales. i have done that in new jersey
most people are just not creative enough to find the different ways to make the big money where they are or they are totally unprepared to take advantage of opportunities when they pass their way .
success comes when preparation, skill and luck coincide with opportunity
many are just not aggressive enough to enter the lucrative deals even if they found some.
others don’t recognize the opportunities as lucrative
i can tell you , if we still owned our house , buying the real estate package we did wouldn’t have been a thought .
we would never had access to the funds to do it .
plus without understanding this market place i would never have considered buying apartments with breakeven rents .
i only got the package because someone else failed to see the value here and so sold there ownership
so the fact we planned on buying a passive business and prepared for it in advance by not buying again allowed us to do it.
the successful people are successful usually over and over even if they fail no matter where they live
Last edited by mathjak107; 04-11-2024 at 09:27 AM..
I have been forced to rent due to lack of housing availability and high mortgage interest rates. I have been looking for a home for 2 years solid. The number is low and the selection is poor.
I have no choice but to be patient. I have been through a few housing cycles before, so I am well aware the pendulum SHOULD swing back at some point. It could be different this time and we could have a very long structural housing shortage. Eventually, I will have to bite the bullet. I am willing to wait a while unless the perfect place falls in my lap at a tolerable price.
All things equal, I would be in a SFH today. I am a reluctant renter. It is not ideal.
I have been forced to rent due to lack of housing availability and high mortgage interest rates. I have been looking for a home for 2 years solid. The number is low and the selection is poor.
I have no choice but to be patient. I have been through a few housing cycles before, so I am well aware the pendulum SHOULD swing back at some point. It could be different this time and we could have a very long structural housing shortage. Eventually, I will have to bite the bullet. I am willing to wait a while unless the perfect place falls in my lap at a tolerable price.
All things equal, I would be in a SFH today. I am a reluctant renter. It is not ideal.
my son has been looking in westchester for two years .
they own a home there but want a bigger one .
so far supply stinks and what little quality places hit the market they usually are snatched up in all cash deals for multiple 7 figures since the homes go for more then appraisals come in .
banks have been saying no to mortgages because the homes are appraised for less
Everything cycles. This market can't last forever. It only seems like it.
Patience is always taxing, but necessary.
Buyers remorse must suck for home buyers but it is very high righ now with so many people buying a home the wrong way -- sight unseen or without inspections or without thinking through all of the associated costs beyond only the mortgage, or just flat overpaying.
My only issue is age. I want a yard for my German Shepherd dog, and I don't have 10 years to wait. I could be in a care home. Or dead.
opportunities to invest and do better then buying a home and tying up the money in a home exist everywhere....
I disagree with that statement. For most people, a house is a good and safe investment. As pointed our previously, your situation is very unique but you always want to apply it across the board. You even acknowledged that the chunk you turned into investment capital came from the sale of your house and you're in an area with rent control.
What is true for your area would not be applicable in my market. A mortgage with a low DP (0-5%) will be cheaper than a monthly rent. Whether that DP is large chunk or small amount of your savings doesn't isn't relevant. If it's a small chunk, invest the rest into whatever you want. If it's a large chunk, you didn't have enough savings to invest into high yield/high risk investments anyway so may as well put into something safe like a home. Eventually you'll own an asset and the monthly cost would be lower or similar to a monthly rent here and many places around the country.
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