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  1. #1

    Default How Do You "Rent to Own" Real Estate

    My question involves real estate located in the State of: CA

    Can anyone tell me how does a rent to own home works? Is it true that these homes are facing foreclosure & basically the renter is there to take over payments towards possible ownership? What should I be aware of or are there any do's and dont's?

  2. #2
    Join Date
    Sep 2005
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    98,846

    Default Re: How Do You "Rent to Own" Real Estate

    "Rent to own" works in whatever manner you structure your "rent to own" deal. Buyers who have bad credit will typically be better off with a contract for deed (a/k/a land contract).

    I would not count on lenders who hold foreclosed properties being interested in offering you a "rent to own" deal. If you find a homeowner who is willing to enter into a "rent to own" deal with you, and that's permitted under their mortgage, you should negotiate the terms of the "rent to own" deal and have them put into contract form by a real estate lawyer.

  3. #3

    Default Re: How Do You "Rent to Own" Real Estate

    There are lots of issues to be concerned with. Rent to own deals can be offered by someone with millions of dollars of spare cash lying around and wants to sell for top dollar all the way to someone who's being foreclosed on tomorrow and will collect your up front payment and run.

    One issue is to be sure they're not in default and have legal title. Another is to be sure that you're not paying too much, the contract has good terms, that a fair amount of your payment is being applied to the purchase price, that there are no encroachments on the property, termites,....the list goes on and on.

  4. #4
    Join Date
    Sep 2010
    Posts
    19,901

    Default Re: How Do You "Rent to Own" Real Estate

    Get a lawyer to look over any contract.

    One way is a "lease with option to purchase." This allows you (possibly for making a potentially non-refundable option payment) to pay rent and credit that rent to an ultimate purchase. This is often done on properties that are just being leased anyway. It's a bit safer as usually the owner has the cash flow to continue his finance. If you can't purchase, you lose little (except perhaps that option payment) than you would have just by renting the property. If you can purchase, you get back some of the money you would have lost if you just rented while looking for a place to buy.

    Most of the other schemes are risky. You always have the problem when contracting for a property that has a senior mortgage on it that something bad can happen and have the mortgagee foreclose on the property and you lose whatever investment you've made along the way.

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