Lots of people have joined into a rent to own agreement with no sufficient understanding or practical knowledge, and they have had a undesirable experience. Don't let this occur to you. Get the knowledge and understanding you need to have just before you make an effort to do a rent to own deal. The following ten recommendations are created to give a potential lessee/buyer something to think about, and they only scratch the surface.
1. Primarily, understand the rent to own strategy. While it is just a lease contract which incorporates an option to buy, the traps lie in the details.
2. Be realistic and truthful with your own self. Why are you unable to purchase a residential property today? What will be different by the time the option period expires? If you can't be sure with regards to your capacity to exercise the option just before the expiration, don't do the deal. You don't want to forfeit your purchase credit money.
3. Be particular with all cost items including the option price (sale price) of the property, the regular monthly lease amount as well as the real estate
4. Time is your partner. Make a deal for as long a lease/option period as possible. The normal option period is one year, but why not negotiate for a two or three year period? Your option binding agreement should certainly enable you to exercise it at any time during the term. Think outside the box. Perhaps the other side will agree to a much longer term if you agree to increase your monthly payments after each year. Additionally, try to get a right to renew the lease/option contract just in case you are unable to exercise the option.
5. Secure your option consideration money. Be sure to ask the lessor/seller to place it in a third party escrow account. Try to get the other side to put your rent credits in the escrow account. Think different simply because the lessor/seller will most likely object to this request simply because it might possibly severely hamper his/her cash flow prerequisites. Maybe a HELOC could be used to fund this portion of the transaction.
6. Be particular with regards to your maintenance obligations. While it is customary to be responsible for upkeep and minor repairs, make sure that you are not responsible for major maintenance. Spell it out, and put dollar limit on your responsibilities. Set a penalty clause in your agreement if the other side is unable to satisfy his/her obligation within a reasonable amount of time.
7. Keep track of your rent to own contract with the county. You want it to get into the chain of title. Also, you should also ask for duplicates of monthly records proving the lessor/seller is making his/her mortgage payments. Furthermore obtain proof of payment for property taxes as well as insurance.
8. Hire a real estate attorney who has knowledge about rent to own legal agreements. Unless you are knowledgeable with local real estate laws and the rent to own principle, do not ever try this type of transaction on your own.
9. Get a home inspector. While you are not buying the residential property at the present time, you are creating a substantial responsibility with your option consideration money and regular monthly rent points. So make sure that your investment is worthwhile.
10. Follow the terms and conditions of your contract. Be careful not to let yourself to lose your side of the agreement. You negotiated the deal, so you better understand and follow it. If you think maybe the procedure is too confusing or perhaps too much of a headache, keep renting until you can get a traditional mortgage loan
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