Rent to Own guidelines

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Rent to Own guidelines
Posted by: Sunset May 27 2004, 05:56 PM

My husband and I are working out an feasible agreement with the owner of a townhome in Jacksonville, fl. We have the option to rent to buy or just buying the home. The home is a two car garage, three bedroom with a room for offices space, and two & half bath unit. He’s asking for 1650 per month. The unit is sold for 249,900.

Their initial investment is unknown, but the facility is in the third phase of development. We believe that he may have bought the unit in the first phases. We were asking to allow a portion, of at least 50% of the rental to go towards the down payment. He is only offering $100 to go to the down payment and we would have 1st choice to buy within three to twelve months. We would have to buy it at the selling price at that time.

The reason why we are not buying at this time is due to our credit. We do not want to rent anymore and prefer our funds to go towards something that will be ours one day. Pay off some debt and increase our buying power by building up a larger down payment.

Are, there any laws governing rent to buy options. Are there any guideline to follow in doing this transactions. Is this a good proposition. What other advice do you have. What other terms can you offer to us.
Posted by: loanuniverse May 27 2004, 08:29 PM

Let me start by saying that I am not in the business of making loans so I have no “other terms to offer you”. The purpose of the website is to help people with commercial loan questions. I just let people bounce off their ideas and problems about commercial loans with me and give feedback. Your situation is residential in nature and my feedback will not be as useful, but let me give it a shot by putting myself in your shoes.

There are a couple of things that I do not like about the deal.

1 $100 towards down payment is not very much.

2 I might have misunderstood your post, but you are telling me that what you are doing is buying a right to purchase the property without a set price? I really don’t like this. There would be a benefit to the transaction if by doing this you were able to lock in the selling price, but not much is gained if 10 months down the line the owner is offered $260,000 and you have to match it.

Now is the time for me to ask the questions:

a How much are you paying for rent now? How about saving up the difference between that and this $1,650 monthly payment for down payment.

b You mentioned an issue with your credit, but have you actually looked at your report? I think that when one is considering getting into a $250,000 transaction spending $10 to get a credit report is a good investment.

Finally, I would like to say that when house hunting your friends are research, research and research,

Good luck.
Author: Commercial Loan Underwriter