Not everyone is financially ready to buy a home. Even with VA loans and first-time homeowner programs, it can be hard to save for a downpayment and get pre-qualified for a mortgage. In a competitive housing market like Paradise, many buyers are getting pushed out of bids because they can’t make full-cash offers.
Fortunately, you have options when it comes to potentially owning a home of your own. Some people are looking into rent-to-own options to secure desirable properties. Learn more about this option before you search, “rent to own homes near me.”
How Rent-to-Own Homes in Paradise Work
A rent-to-own home is also called a lease-to-own home. This occurs when a potential buyer agrees to rent the home for a period of time (typically one to five years) before buying it from the homeowner. During this period, the buyer pays rent to bring down the overall cost to buy the house. This makes the purchase more affordable to the buyer, while the homeowner is able to bring in a little rental income along the way.
For example, if a home would normally sell for $360,000 then a renter might pay $2,000 per month in rent over five years (60 months). If $1,000 of that goes towards paying for the home, then the renter would have paid $60,000 over five years. This brings the purchase price down to $300,000.
It’s up to the homeowner to decide what percentage of the rental income goes toward the purchase of the house. During this five-year period, the buyer will also have time to build up their credit scores and can potentially secure a mortgage because they require less money from the bank.
Understanding Lease-Option Vs. Lease-Purchase
If you are looking for rent-to-own properties in Paradise, understand the legal steps you will take to move into a home. There are two key types of rent-to-own properties:
- With a lease-option agreement, buying the house after your rental period is up is optional. You can walk away from the house entirely. However, you will likely forfeit any payments you made to the property.
- With a lease-purchase agreement, you are required to buy the home from the owner at the end of the rental period.
There might be other agreements that you have to follow as a rent-to-own tenant in Paradise. For example, it’s not uncommon for a tenant to pay non-refundable upfront fees (called an option fee) related to the purchase of the house. These range from one to five percent of the total purchase price.
You will also want to work with the current owner to establish who is paying for what in regard to home costs. Read your agreement to learn who is responsible for utilities like electric and water services and who is responsible for property maintenance. While a renter might not have to take on these costs, the homeowner might pass them on to you as the future owner.
Finally, learn what kinds of modifications you can make to the property. The owner might not want you to make significant changes as long as they own the house – especially if you have a lease option and could walk away from the deal.
When in doubt, look for a Paradise lawyer who understands rent-to-own agreements so they can make sure that you are protected.
Is Paradise a Good Market for Rent-to-Own Homes?
If you search “rent-to-own homes near me” you may come up with dozens of results or only a few. This is because the housing market changes the likelihood that people will choose this option.
In a seller’s market, fewer people are likely to list their properties as rent-to-own. This is because they can get competitive offers on their houses immediately and don’t have to manage the properties as landlords. Some sellers are worried about a potential housing bubble bursting in the future, so they want to sell immediately.
However, in a buyer’s market, when supply is high and demand is low, a homeowner might be more willing to accept renters if it means they will buy the house in a few years. The seller will be able to make some rental income and won’t have to worry about listing the property after the designated period.
Learn about the Paradise real estate market to understand who is buying and who is selling right now. These trends will determine home availability. However, keep in mind that every seller is different. Even in a hot market, a homeowner might want to wait a few years before selling a property. Entering a rent-to-own agreement could benefit both parties.Agents Compete, You Win.Hire a Realtor who can find rent-to-own properties in your area.
Find a Rent-to-Own Property in Paradise
If you are ready to take a step toward homeownership in Paradise, consider looking for rent-to-own properties to invest in. There are a few basic steps you can take so you can easily find a home and enter an agreement with the owner.
First, identify the neighborhood you want to live in. While you can change where you live frequently as a renter, you don’t have that luxury as a future owner. You want to make sure you exclusively look at homes where you plan to live for the long term.
Next, meet with a financial advisor or accountant to help organize your money. This person should help you set a budget for what you can afford for rent and the premium rate to buy into a house. This expert can also give you tips for building up your credit and increasing the chances that the bank will approve your mortgage application in a few years.
Finally, hire a Realtor who can help you search for “rent to own properties near me.” While a basic Google search can show you photos of homes, you want to be able to tour them in person. Your Realtor can schedule appointments for showings and walk you through the necessary paperwork.
With this process, you can find your future dream home in Paradise – even if you don’t own it just yet.
Hire a Realtor Through UpNest
When it’s time to contact a Realtor, hire the best in your area. At UpNest, we carefully vet real estate agents and only allow the top performers to operate in our system. We also look for agents who specialize in unique markets, like the rent-to-own niche.
The best way to find rent-to-own properties in Paradise is by hiring an UpNest Realtor. Skip the “rent to own homes near me” search and use our service instead. Our tools are free for buyers, sellers, and rent-to-owners.
What is a rent-to-own agreement?
In a rent-to-own agreement, a renter pays a premium fee to a seller over a period of time (usually one to five years). This includes the standard rent payment and a partial payment into the asset. After the rental period is over, the owner will sell the remaining value of the asset to the renter.
Do rent-to-own agreements benefit buyers?
Some buyers may benefit from entering into a rent-to-own agreement. This is an option if you have poor credit or you lack a downpayment on a property. If you can pay your rent on time each month and plan to stay in one place for several years, this could be good for you.
Do rent-to-own agreements benefit sellers?
Some sellers can benefit from entering a rent-to-own agreement. This could be good if you aren’t ready to sell your house now but you want to lock in a buyer. It can also help you bring in income in a slow market where it is hard to find qualified buyers.
Do you have to buy a rent-to-own property after the lease ends?
In some cases, you may be required to buy your rent-to-own property after the lease is up. This occurs when you have a lease-purchase agreement. However, if you have a lease-option agreement you can walk away from the property — but you won’t get any money you put into it back.
Who pays for maintenance in a rent-to-own agreement?
In a traditional rental agreement, the owner covers the cost of maintenance on a property. However, some owners might place that burden on tenants if they have a rent-to-own agreement. This is because you are buying into the house and should be able to maintain it. Check the maintenance section of the lease before you agree to it.