The typical process of purchasing a traditional or Airbnb investment property involves saving up enough money for the down payment, getting pre-approved for a loan, and finding a home for sale that fits your budget. However, this process doesn’t always work for everyone. You might not have enough money saved up for a down payment. Or your bad credit score could disqualify you from getting a mortgage. The good news is that there is an option; rent to own homes.
What Is a Rent to Own Home?
A rent to own home is a property that you purchase via a rent to own arrangement. With this kind of contract, you agree to rent a house for a specific duration before gaining ownership. This duration could range from a few months to years, depending on the terms of the contract.
There are two different kinds of rent to own agreement; a lease-purchase agreement and a lease option agreement. With the lease-purchase arrangement, you are legally obligated to buy the property. However, the lease option agreement gives you the option of buying the income property after a specified time period.
A typical rent to own agreement involves these components:
- Purchase price – The agreement will specify when and how the purchase price will be decided. It could be based on the investment property’s current value or an anticipated one. In some situations, the price is settled when the seller and buyer sign the contract. At other times, the buying price will not be made official until the lease expires.
- Rent payments – The contract will also specify how much you’ll be paying for rent each month. These payments are usually higher than rent prices in the neighborhood because a percentage will be set aside towards the future purchase of the rental property.
- Maintenance – The agreement might require you to cover costs like property taxes, HOA fees, repairs, and maintenance while you are renting out. Be sure to peruse the contract with an attorney to understand what each party is responsible for.
- Option money – You will be expected to pay the seller a non-refundable, one-time fee. This amount is usually a percentage of the property’s purchase price.
- Lease term – The contract will indicate a specific lease term. If the lease expires and you either change your mind about the purchase or cannot qualify for a mortgage, the option to buy will expire. You might be forced to forfeit any payments made during the lease, including the option cash and rent credits earned.
How Do I Find Rent to Own Homes Near Me?
Consult an experienced realtor
In your rent to own investment property search, one of the wisest things you can do is work with a local real estate agent that has some experience in rent to own transactions. Through their knowledge of trends in the geographic area, their extensive real estate networks, or specific MLS searches, an agent can help you find investment properties for sale that fit your strategy and budget.
An agent will come in handy when negotiating the rent to own agreement. At times, such agreements come with lots of unfamiliar terms and conditions. If you are not careful, the seller can take advantage of you. Having an experienced agent working in your best interest will protect you from a bad real estate deal.
Before hiring an agent, here are some of the questions you need to ask:
- How many rent to own deals have you conducted?
- Are you familiar with writing a rent to own agreement?
- What advice can you offer to someone looking for rent to own traditional or short term rental properties?
Search rent to own sites
This is another great strategy for anyone wondering how to find rent to own homes. There are numerous sites out there that are designed to connect owners of rent to own homes with potential buyers. Here are some of the sites you could look at for rent to own home listings:
- HousingList – This site allows you to narrow down your search for rent to own homes by location. However, you will have to sign up for a trial membership first before accessing all the details about a particular home. Signing up also gives you access to more features such as the ability to check your credit score and access the neighborhood demographics.
- Rent to Own Labs – This website lets you narrow your rental property search by zip code, state, or city. Just like HousingList, you must register first before accessing information about a particular property. After registration, you can also access the contact details of the current homeowner.
- Foreclosure.com – This website has a whole section dedicated to rent to own homes. You can filter your search results by property type, the number of bathrooms or bedrooms, or your anticipated price range.
- Craigslist –Craigslist is the best place to find rent to own homes for free. All the details are available, including the contacts of the property owner. For example, if you are looking for property in the NJ housing market, all you need to do is Google ‘Craigslist rent to own homes in NJ’. You will see results showing rent to own properties in Central, South, and North Jersey. You can narrow down your search by price, miles from zip code, square feet, number of bathrooms or bedrooms, availability, and open house date.
Don’t forget that you need to analyze your rent to own home if you plan on eventually renting it out! You can enter the address of any investment property into Mashvisor’s database and receive a full property analysis report. Try it out now.
Look for a company with a rent to own program
Some companies have dedicated rent to own home programs that are designed to connect buyers and property owners. A good example is Home Partners of America that operates in multiple markets including the Atlanta, Baltimore, Charlotte, Asheville, Austin, Birmingham, and Chicago real estate market. Qualified potential buyers work with licensed real estate agents to find the right property that fits their budget. Another company worth considering is Divvy Homes which operates in the Phoenix, Memphis, Dallas, Cleveland, Tampa, and San Antonio real estate market.
Reach out to owners of lingering homes
Another great strategy for how to find rent to own homes is to contact property owners and sellers that have properties listed in the market. You should especially look out for listings that have been on the market for a long time. Out of desperation, the property owners might be willing to discuss the possibility of a rent to own arrangement. If you decide to pursue this for sale by owner (FSBO) strategy, you need to get a real estate attorney or agent involved. Since most people don’t understand how the idea of rent to own works, it would be wise to have an expert do the explaining. The attorney or agent will also help you negotiate a good deal.
Anyone can learn how to find rent to own homes in their area. Whatever real estate investment strategies you use to find rent to own property, be sure to protect yourself from any potential pitfalls. Work with professionals, have everything in writing, and do your due diligence before making a decision.