As mortgage laws get tighter and people are finding it harder and harder to qualify for their own mortgages today, rent to own is fast becoming an option that many people are turning to.
BUT what makes a great rent to own tenant-buyer or rent to own program?
Truthfully, the best and most successful rent to own tenant-buyer is someone that already has a homeowner mindset.
Young, old, single, married, families, divorced, self-employed or new to the country. It doesn’t matter which category you fall in to, rent to own could be a good option for you if you have not been able to secure a traditional mortgage as a result of credit challenges or lack of down payment. Rent to own will give you the opportunity to choose your own home, the time to repair your credit and the discipline to build your down payment while you build equity in the property BUT it isn’t a slam-dunk for everyone. Even though rent to own can work for many types of situation, here are the mindsets of the people that will succeed in a rent to own:
1. Eager and motivated to be a homeowner because they understand that real estate is one of the best ways to begin building their wealth
2. Determined to repair any credit issues that they have to deal with
3. Understands the benefits of equity appreciation
4. Takes pride in maintaining and upkeep of their home
5. Is tired of spending hard earned money on rent which only makes their landlord rich
Even with the right mindset (which is half the battle), you still need to align yourself with the right rent to own program or model. There are many options out there (Tenant first where you select your home, property first where you select a home from a list of available homes, no-money down etc.) so the best advice is to always do your due diligence on the people or company offering the rent to own and on the rent to own programs available. This is key. A great rent to own program can be defined by many things and is likely to be subjective but for me, here are some of the things you should be looking for:
1. A program where you are supported on your credit repair efforts. Two or more heads are always better than one. Even having someone you trust to bounce ideas off of or have questions answered sometimes makes the difference.
2. A program where enough of the monthly payment goes towards your down payment or option credit so that you can increase your down payment to 5% or even better, 10%.
3. You should be selecting your own home. Even though it is a “home” for your family, it should fit your needs and budget… and you should LOVE it. How likely are you to succeed if you don’t enjoy being there or being in the neighbourhood.
4. Transparency. Are all the numbers provided to you up front? Avoid surprises later by ensuring that you agree on the numbers before you commit to the property.
5. Homeowner feeling. Don’t enter into a program where you are going to be “landlorded”. One of the best things about rent to own is that you have the freedom to update the property and make it your own. You shouldn’t be micro-managed around being a homeowner.