We Buy Houses Philadelphia

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Rent to Own — Pros and Cons — Part 1

Since I am currently currently working on a Rent to Own house in the Philadelphia area, I will continue talking about Pros and Cons for Buyers and Sellers regarding rent to own.  For a summary of what rent to own is see my post Lease Purchase Options (aka Rent-to-Own) – What is it?.

There are Pros and Cons regarding Rent to Own as either a seller or a buyer.  As with anything, it may not work for everyone but in the case of sellers, it can provide another avenue other than just listing it with a real estate agent who just markets the property on the MLS hoping that a buyer calls; or in the case of buyers, it can provide an opportunity to move into a house immediately if you were told no by lenders.

Below is a list of Seller’s Pros

  1. During the Rent to Own contract, the seller can keep the tax deductions and the depreciation deduction. (I am not an account, so seek legal advice from your CPA)
  2. Since the seller is offering better terms for their house, they can expect to get current market price or higher.
  3. The seller receives non-refundable option money. For an option contract to work, the buyer must pay some type of consideration to make the contract binding.  Usually the higher the option amount the more likely the buyer will purchase the property.
  4. The seller can have the buyer pay maintenance fees and repairs.  This can be negogiable.  For example seller pays any repairs above $1,000.
  5. Rent to Own buyers are usually quality tenants who will live in the house as if it was already their own.  The buyers want to keep it looking good because they are trying to buy it.

Below is a list of Seller’s Cons

  1. If the seller’s house appreciates significantly (like 2004-2006) during the Rent to Own period, the buyer receives the added appreciation because they agreed to a purchase price that is generally set at the beginning of the lease period.
  2. If the seller needs the cash via immediate sale, the Rent to Own strategy may not be the best route to go. Buyers generally need at least 12 months to obtain financing so that they can buy the house.

My next post will discuss Buyer’s Pros and Cons for Rent to Own.

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January 23, 2010 - Posted by | Uncategorized | , ,

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