Is the Rent to Own Option Right for You?
Since you are in the market to buy your own home, you are likely aware of the advantages home ownership provides:
- Tax shelter benefits
- Appreciation of property value
- Financial security
- Freedom to utilize the property as you desire
- Greater leverage for credit and borrowing
- Helps strengthen credit score (if all payments kept current)
If you are actively seeking homes for sale on a Lease to Purchase agreement (rent to own) then you are typically either (1) a very smart renter, (2) a very smart real estate investor, (3) not quite ready to make a commitment (4) not in a position to purchase a home through conventional means yet or (5) any combination of the above.
Most of the clients we help with a "rent to own" purchase fall into one of these scenarios:
First time Home Buyers – If you are looking for the absolute easiest way to penetrate the real estate market this is your best option.
Landed Immigrants – If you are new to our Country and require a year or two to get your citizenship in order before applying for a mortgage this works extremely well.
Anyone Who Just Needs a Break - If your credit needs a little time to repair lease to own could provide the solution.
Investors – Are you looking to maximize your buying power and build equity and cash flow? Click here to drop us an email and one of our Vantage West investment specialists will buy you a no-pressure Starbucks coffee to discuss your investment goals.
Why Rent to Own?
Without a doubt, the Lease 2 Purchase contract is the quickest, easiest and least expensive way for you to buy, sell and invest in the Kelowna real estate market. This unique method truly offers a win-win solution to transferring real estate ownership. You as the buyer benefit from minimum cash out of pocket, faster equity growth, increased buying power, you get time to “kick the tires” and can often get a "pass" on credit problem issues. You as the seller benefit from a top sales price (even if demand is low), positive cash flow, the largest market of buyers, minimum risk, no maintenance, no land lording anda non-refundable deposit for added security and peace of mind.
Tenant/Buyer Benefits of Renting to Own
Faster equity growth: Your equity accumulates much faster than with conventional financing through a bank or lender.
Rent money is working towards purchase: Every month a portion of your rental payment is credited towards your down payment or the sales price.
Option money is credited towards purchase: When you sign a Rent to own contract, you will pay the seller an option deposit. This money is your vested interest in the home and will be fully (100%) credited to you when you buy the home.
Minimum cash out of pocket: When you purchase a home the conventional way, you will pay up to a 20% down payment plus closing costs and other fees. When you buy with a Rent to own, you only pay first month's rent and not more than a 6% down payment.
Often no additional down payment at the end of the contract (the close). Since you have given the seller an option deposit and you have been receiving monthly rent credits, there will be very little or even nothing left to pay at closing.
Profits from appreciation: Since the sales price is locked in before closing (as specified in your agreement), any increase in property value will be solely to your benefit.
Possible sale for a profit: If your agreement allows for an “assignment” you have the option to sell to a third party for a profit.
Credit problems okay! Is your credit rating hurting? The beauty of lease to own sales is qualification restrictions are at a much lower threshold.
Control of the home: You will be put in full legal control of the home for a specified period of time without actually having to own it.
Quick move in time: You can typically take possession of the home in a week or less, instead of conventional move in times of one to three months, after your offer is accepted.
Maximum leverage: You are spending very little money to control a potentially very expensive, and very profitable piece of real estate.
Time: Before you actually buy the home, you will have 12-36 months (depending on your agreement) to repair your credit, find the best interest rates, investigate the home and research the neighborhood and/or schools.
Peace of mind: You will have full control of the home and can maintain or improve it however you wish.
Landlord/Seller Benefits for a Rent to Own Sale
No taxes, less liability: You no longer have to pay property taxes and your liability exposure will be dramatically reduced.
Top sales price, even if demand is low: You attract more buyers who are willing to pay a premium because of the exclusive financing terms and value you're offering.
Higher than usual rent: Since you are flexible on your financing terms and are offering a tremendous value, you can demand a higher than usual rent. This is a result of the payment being based on prevailing interest rates and a 25 year amortization and not the currently soft rental rates... thus your cash-flow is greatly improved.
Positive cash flow: Since you can demand a higher than usual rent, your positive cash flow will increase.
Non-refundable option money: When a tenant/buyer executes (signs) a Lease 2 Purchase contract, you receive a non-refundable option deposit that is yours to keep should they default or decide not to buy. Because you are renting to tenants who have a vested interest in your home, they think like homeowners and tend to take good care of it. Tenants who have a vested interest often feel a "pride of ownership" that encourages them to pay on time, perform routine maintenance and make improvements to your home.
Highest quality tenants equals minimum risk: Since tenants/buyers are required to pay an option deposit those not qualified to purchase your property are generally weeded out at this step. Those who have the cash will want to protect their investment by making their payments and taking care of their new home.
No maintenance, no land lording headaches: With this arrangement the general day to day maintenance and upkeep of the property is the responsibility of the tenant/buyer allowing you to sit back and enjoy the positive cash flow without the usual inconvenient requests and demands of a typical tenant.
Tax shelter is held intact: Because you remain on title until the option is exercised, you maintain all of the tax benefits of ownership.
You have access to the largest pools of buyers: You are marketing your home not only to traditional buyers, but also to renters and investors. These three groups make up over 95% of people whom buy real estate. Currently this is the only segment of the market that is weighted in favour of the seller.
Peace of mind: The rent to own model is safer than conventional rentals because of the quality of the tenants and their vested interest in your home. It also means someone is living on-site who will watch and guard your home against fire, theft, vandalism, etc.
Rent to Own FAQ's
Is it legal? Yes, it's perfectly legal in Canada, all 50 United States, Australia, the UK and any other country which has a free-market economy where lease agreements and option agreements are legal.
How much money do I need to start? In order to qualify for this type of program, a minimum 6% down-payment is required. This equates to a minimum $15,000 which would allow for a starting purchase price of $250,000. Due to high demand for rent to own options, in order for you to begin the application process we require proof of the entire down payment. Funds expected but not yet accessible cannot be used to qualify (ie. a gift, an inheritance, a loan, a settlement, or equity in another home). This money will be used towards your agreed purchase price.
What is the difference between a Lease 2 Purchase, a lease option and a rent-to-own? None! There is absolutely no difference between a Lease 2 Purchase, a Lease Option or a rent-to own. All are referring to an arrangement that contains both a lease contract and an option to purchase contract. They are all exactly the same! Don't let anyone tell you otherwise.
Who carries the property insurance? The insurance on the home is carried by the owner of the home. The insurance on the contents of the home will be carried by whomever owns the personal property inside, usually the tenant/buyer. This is typically called renter's insurance.
Who pays the taxes? The buyer is now responsible for paying the property taxes.
Rent to own in kelowna, BC
Curious? Learn more about renting to own with our Kelowna real estate specialists.
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