How to Best Utilize the Rent to Own Option

The rent to own option for buying houses is very lucrative and holds benefits for both the buyers and the sellers. Both the parties involved in the purchase of a house have ample advantages while using this mechanism. Here is a how you can utilize the rent to own policy to gin maximum returns.

Most of the home owners who want o sell of their house always want to get it sold of in exchange of a lump sum amount of money, very few of them are usually ready to sell of their home via the lease to own option. But the rent to own option provides the users with maximum benefits. Under these circumstances the home owners get a certain amount of money as a down payment and they get monthly rent of their properties as well, a portion of the monthly rent goes to the rent credit account.

At the end of the option period the buyer has to purchase the home, in case the buyer disagrees to buy the house then the entire rent amount goes to the homeowner.

For example suppose the price of your house is about $200,000, and the rent value of your property is about $400 in the market then the rent to own agreement can be in the following form:

Period of lease: one year

Monthly rent: $800

Purchase price: $200,000

Rent Credit: $400 per month  

So about $400 from the rent of each month is accredited to the Rent credit account, now if the lease holder wants to buy the house after one year, then he has to pay up about $200,000-$4800= 195,200. The $4800 is the total rent credit accumulated during the twelve months. Now suppose the tenant does not purchase the property then after the two years of the lease period is over, the tenant can be evicted, and the seller gets to keep the entire amount of rent. The $400 acquired by the seller s considered by the IRS as “option consideration” so it is nontaxable income and does not need to be reported until the house is sold or the lease period expires.

Not everyone has sufficient savings so that they can buy a house instantly by making cash payment; most of us have to rely on bank loans to acquire our dream homes. But what if the person concerned has a bad credit? Under such a circumstance the person cannot avail a home loan, the only option left in such a scenario is to get a rent to own home. By leasing out a hope to buy it, the buyers actually ensure that they get to enjoy the benefits of living in the home before actually buying it.

Some other advantages include the fact that the prospective home owners can buy more time to repair their credits so that they can apply for a home loan at later time. Typically rent to own home deals offer the buyer with monthly rent credit of about fifty per cent thereby lowering the total amount to be paid by the hopeful buyer when clinching the deal.

So we see that the rent to own home is the best possible option for both the buyer and the seller alike.