Posted by Philip on September 21, 2003 at 06:04:28:
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Rent to own - Posted by Wayne
Posted by Wayne on September 20, 2003 at 06:53:47:
Could someone give a good explanation of the difference between “Rent to Own” & “Lease with Purchase Option”? I am familiar with the lease purchase. Thanks
Re: Rent to own - Posted by Lyal
Posted by Lyal on September 20, 2003 at 08:16:24:
Wayne,
In general, and this is just as I understand it, in a “lease / option” the seller gets a non-refundable deposit in the area of 3% - 5% (more if possible) up front granting the buyer the exclusive “option” to purchase the home at a pre-agreed price in a specified amount of time (1 - 2 yrs ?). You may or may not credit a portion of the monthly lease amount (when paid on time) towards the price (or down-payment) when they purchase. If they don’t exercise the option and buy the home, they forfeit this “rent credit” as well as the up front “option consideration” they paid.
In a “Rent to Own” (also called “Buy-Like-Rent”) they just move in a start making rent payments and after a pre-agreed number of payments they own the place.
In my opinion the second option is much riskier as they have no “skin” in the deal that would incent them to pay on time and be on their best behavior whilst they are living there. Also no leverage for you if they trash the place.
I had a failed “Buy-Like-Rent” deal come my way just last week. Real nice lady sold her '77 Artcraft mobile this way to a guy for 17K (with no papers signed, just a verbal agreement), he moved in, never made a payment to her or to the park, lived there for 3 mos free and did a bit of damage to the place (nothing major, just unfinished paint in several places, closet doors taken off etc). She’s stuck with the home and the 3 mos lot rent plus penalties. She has no resources to pay this let alone fix the damage and advertise it, so she asked me for 5K just to get clear of the problem. The home is 3BR, 2BA with all new double pane windows, dishwasher, water softener, updated carpeting, and interior paint, nicely built addition etc.
I think I may be able to help her B-).
All the best, Lyal