It is often very difficult to find a place to rent in the city, and if you ever do find one, a small space can be particularly costly especially if it sits in a prime location. In case you are thinking about buying a house in the city, this will also be a challenge. First, it will be pretty hard to find a cheap property in the heart of a busy metropolis; second, if you ever do find one, it’s going to be small yet very expensive. An option would be to purchase a house that’s in the outskirts of a city. Another alternative is to get a rent-to-own house.
What Is a Rent-to-Own Plan?
If you opt for a rent-to-own home, this means that you are renting a property with an option to buy it once your lease expires. At the end of your lease, if you are planning to travel or to try your luck in another state, you can opt to move out instead of purchase the property. Also, the price of the house is already determined before the lease ends, which means that the price is set even before you make up your mind about buying the place or not. So, it can be a loss in case property values go down when your lease expires.
Pros versus Cons of Rent-to-Own
As with most choices, there’s a good side and a bad side of a rent-to-own plan. Below are a few issues that you should thoroughly consider.
1. Pro — Knowing the House
A renter will live in the house that he might consider buying. Because of this, he’ll be able to truly understand the environment and the property. In other words, he’ll be able to get a feel of the house and the neighborhood, which will help him to see if he can have a family and grow old in that place. Unlike home buyers that only get to see a property for sale during open houses, a renter will spend a long time in the dwelling. So, he’ll know if the water supply is good, if the basement is leaking, or if there are molds. In case he finds something unfavorable, he can pass up the chance of buying the property.
2. Pros and Cons of Related Cost
– Down Payment versus Option Fee
Down payment for a new home can be pretty expensive for most, and this can deter people from buying a home. Choosing a rent-to-own plan can benefit those who do not have enough money for down payment. But still, they have to collect a significant amount so that they can first pay for the option fee, which will go to the down payment in case they do decide to purchase the house when the lease expires.
– Improve Credit Score
For those who have been denied mortgage due to low credit scores, a rent-to-own plan can benefit them too. During the time that they’re renting a place, they can work on improving their credit score as well.
– Rent Credit
Then, there’s also the issue about the rent credit. In rent-to-own agreements, the rent credit becomes void if the lessee fails to pay rent on time. This can be a significant loss if, say, the rent credit is $500 and the lessee is a day late in paying his rent three times during the lease period. That’s equal to a loss of $1,500.