So you are fed up with renting. You need to own your own home, but you do donrrrt you have a deposit. No doubt you’ve probably heard of “the perfect solution” – rent to have. But could it be really as perfect as everyone says – hardly. There are a few secrets about rent to own properties you will want to be familiar with. They may be most overlooked areas of a rent to own deal. So allow us to find out the truth about lease to possess homes.
How Rent to obtain Works
Making this how it works. You’re renting a house together with the option to buy. You’ll have a lease that can typically last between 2-3 years. The seller will even expect you to put some form of upfront downpayment or option fee. It’s usually 1 to 7 % in the decided upon final cost. Beyond the rent, you will pay what is known a Rent Premium or Rent Credit. This extra amounts put towards price of the home.
Let’s wait and watch what sort of Salt Lake City, Utah rent to obtain is acceptable out. Since January, 2017 the median rent for any 3 bedroom, 2 bath house in Salt Lake City is $1,500. The additional amount that you’ll pay towards purchase is negotiable. Generally you should expect to pay 20 to 50% higher than the market rent. With regard to argument, let’s opt for 25% which is about average. So you will pay $1,500 monthly in rent and an additional $375 for the purchase. If your lease lasts Three years, you would have a rent credit from the quantity of $13,500. Median house values in Salt Lake City are $280,000. If you paid a 3% option fee of $8,400 and combined by investing in the rent credit, you would end up with a deposit of $21,900 or 7.8%. Not bad.
The reality regarding buy to rent
Would you like to know the dirty little secret few buyers with your position realize? In case you choose that you’re unable or not wanting to purchase the house after the lease agreement, you forfeit ALL of the money you have paid. That features the Rent Premium and the option fee. Gone. All of it. The vendor keeps the cash so you reach call a moving van and commence around.
Selecting surprised on how more often than not this happens. The client might run into some issues with your home and they also want out. Money lost. The purchaser is probably not in a position to be eligible for a a mortgage. Money lost. Or, think the seller doesn’t pay for the mortgage and the property gets foreclosed on. Yikes! Money lost.
So, before you race to snap up the closest rent to own or lease option property, make sure you do your due diligence and also have the house inspected. Start working which has a lender to be able to qualify for home financing as well as goodness sake, make sure you really like your home.
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