Rent to Own for Buyers is a subject often overlooked when discussing this strategy of home ownership. Investors and sellers often use this low risk strategy to boost income and move their houses into positive cash flow or at least neutral if they have home loans and other property expenses to cover. And there is a bazillion webpages offering information for them.
Home Buyers - NOW IT'S YOUR TURN - This article will give you a good idea of What's in it for You.
Rent to Own For Buyers:
1. Consider your financial position carefully. While the rent is not "dead rent" you will be paying above normal market rent for the right to own the home and to have some of the rent allocated as a "price credit". Do a new budget before you buy to make sure you can afford this. As you are, in essence, buying your home you should expect your payments to be in line with standard mortgage payments i.e. usually higher than rent.
2. Rent to Own for Buyers is NOT suitable for all buyers. You will fall into one of two categories.
a. Buyers who have little money to put towards their own home and cannot get a bank loan. You will probably be a first home buyer.
b. Investors who have good cash flow but because of bank limitations they can't get any more loans to buy more properties.
Whichever group you fall in to you MUST bear in mind that the Rent To Own for Buyers strategy is a blend of renting and buying and the paperwork, although tedious, MUST be read thoroughly so that you are clear about your rights and obligations, both as a tenant and as a home owner.
3. Your frame of mind must always be that of a BUYER not a renter/tenant. More on this later. As a home owner you have the right to decorate and alter your home as you wish. However, even thought you "own" your home, the title deed is still in the name of the seller and they must be informed of any planned major building work or structural changes you want to make before you make them.
4. The Paperwork. Firstly, you will be signing a standard lease/rental agreement. This is the law. The second piece of paperwork is an "Option" agreement. Don't get all panicky over the words - it is just the legal stuff that lawyers love so much. However it is the most important bit of paperwork for the this strategy. In it is the following critical bits you need to know:
a. The amount of "up-front" money you will need. The seller should credit this as a price credit i.e. come off the price of your home.
b. The periodic payment required - weekly, fortnightly etc.
c. How much of your periodic investment is rent and how much is a price credit. Obviously the bigger the price credit the better.
d. How long is the agreement valid for. Usually the longer the better as this gives you time to reduce the amount owing i.e. build up your equity. Your equity will also increase with time due to capital growth (house value increases with time)
e. What rights do you have as the "owner" (you have "Equitable Ownership"). This should include the right to sell your home to someone else (with conditions of course) and/or the right to give or sell the option agreement to someone else. The seller must always be told of any of these changes should you choose to exercise them. This will also be in the paperwork.
f. What you must/can do before the option term expires
g. Any penalties associated with late/non-payment or failure to get finance by the end of the term. Remember you are BUYING your home, NOT renting. Ask yourself "What would a Bank do if I didn't pay my mortgage?". The seller has the same rights as the bank.
5. You MUST be in a BUYER frame of คอนโด กรุงเทพ mind always. This means that if something needs to be fixed/replaced/maintained in your home YOU sort it out, NOT the seller. Yes I know you have a lease agreement in place as well as the option agreement. Yes I know that under a lease agreement a tenant is entitled to get the owner to do all repairs and maintenance etc. HOWEVER, if the seller sees that you are acting under this paperwork he will assume you are no longer a "Buyer" but just a "Tenant". You can expect a letter from him asking for you to clarify your position. Be careful here. If you decide to push your legal rights under the lease (which you are fully entitled to do) you will most likely be asked to give up or cancel the option agreement and hence no longer be a home owner. This will result in the following:
a. You will end up paying less (Yay).
b. Any money you have paid towards the price of your home will be forfeit i.e. you won't get it back. This is ironclad in the paperwork. (big Boo).
c. The seller will most likely sell your home to someone else and you will have to move.
Bottom line - Rent To Own For Buyers is a strategy for those who are serious about being home owners and have a gut-wrenching desire to get on the property ladder.
This strategy is the fastest and easiest way for families to get into their first home and on their way to truly building their wealth.
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