Rent-To-Own Knowledge?

just ask, i've done this before with places that were not for rent. call the broker or have your broker call the listing broker and ask if they would be willing to consider a lease with option to buy. after you get a response and if they say yes, then you hammer out the details. your agent should be able to guide you on how to do this.

btw, all the details such as buy price and if rental payments go toward the price will be in your contract. make sure you have a clear contract with the exact purchase price AFTER the rental term is complete and how much of your rental payments go toward that price. do not be vague in your contract!

ok. so i guess my biggest question the would be: if we hammer out the price now - before the the rental - then i would be working on a price that corresponds to the market now, not the market that i hope to take advantage of 12 months from now, correct? that is in the best interest of the owner but really defeats the purpose of what i am looking to do. maybe the best option is to rent with option to own with possibility of parts of the rent going towards a purchase (should we buy) AND right of first refusal in a year or when a purchaser comes in.

I don't understand why you want to rent to own.. why don't you just rent and then look to buy later?

it would only apply to one or two of the homes that we really like. the only reason being that they may not be available in year.

Sounds like you want a test drive or are trying to time the market. So I would say you need a good attorney.

i would say that if the owners of those homes we like are open to that option we will investigate it but otherwise we may look for other rentals and wait it.

elaborate on "i would say you need a good attorney."
i know that i do but in what respect are you referring?

As kittens said, all the parameters must be stated plain as day in your contract. Otherwise, you're putting yourself into future headaches.

I think you're over analyzing. Rent the house you like and then negotiate with the owner in a year.

IMO, it's really, really hard to do this. Assume sellers want to sell so they can take their $ & move on. If Sellers become landlords, they can't take the cash & go.

"if we hammer out the price now - before the the rental - then i would be working on a price that corresponds to the market now, not the market that i hope to take advantage of 12 months from now, correct?"
This is another reason why it's very hard to do a rent to own. You want yr cake & eat it to, but so do they.

IMO, if the owner isn't offering a rent to own, they will probly say no. If they say yes, hire a really excellent RE attorney to represent you.

aifamm - i would "rent the house i like and negotiate with the owner in a year" but they are currently not offering their house for rent - only for sale. i thought that was clear. that was the point of asking how to approach them about doing so.

I agree with aifamm, rent the home you would like to own by offering to rent it. If a seller cannot find a buyer they may take you up on your offer. Then you are the first in line to buy down the road, when prices should be more reasonable.

If I'm a seller right now, I want to sell right now. I don't want to rent it to you for a year so you can buy it from me for probably less money.

Shares of NY is offering a rent-to-own option (http://www.sharesofny.com/rent2own/) on certain apartments. Here are their terms. I don't know how standard they are, but they may give you some ideas on how these deals can be structured:

Prior to the Tenant-Purchaser taking possession of any apartment, all terms (i.e: rental rate, lease term, purchase price, etc.) will be agreed to and the Tenant-Purchaser will execute two documents with the Landlord-Seller: a standard Lease and a standard Purchase Agreement. Simultaneously with the signing of these documents, the Tenant-Purchaser will submit a non-refundable deposit of $25,000 (the "Option Deposit") that will be placed in escrow during the term of the lease. During such term, a rent credit (the "Rent Credit", monthly rent less monthly maintenance) will accrue on behalf on the Tenant-Purchaser and will be applied towards the purchase of the apartment only if the Tenant-Purchaser closes title with respect to the apartment. By the end of the lease term, the Tenant-Purchaser has two options: (i) proceed to closing and secure a loan, if necessary or (ii) elect to not exercise the purchase option and forfeit the Rent Credit and Option Deposit.

Some developers are sellers right now, and soon they will have no option but to rent, because otherwise they would sell at a loss. individual home owners might be in a similar situation if they have a high cost basis on their home. It never hurts to ask if they are open to renting, no?

okay...but what if you are a seller that has had your house on the market for 6 months to a year and you are seeing 100's of thousands of layoffs on the news everyday, the stock market is falling, local businesses are going under, your neighbors can't sell their homes either (i know this is all far-fetched, probably could never happen but humor me), banks are tight about giving out mortgages and you are getting nothing as you sit in your home that you want to be out of while you continue to pay the taxes and the bills. oh...and it looks like things will be getting worse. what if you are that seller?

OnTheMove - thanks for the link.

OnTheMove, so someone who decides not to purchase loses a $25,000 "option deposit" on top of paying rent? That doesn't sound like a very good deal, unless you are pretty serious about buying upfront.

"what if you are that seller?"

IMO, never underestimate the potential unreasonableness of a seller. This is not just a financial decision for them, it's an emotional one, as well. So, altho you are correct, many Ss are in denial & refuse to acknowledge reality.

PMG - i think that is pretty standard. i read it somewhere else too. they did not specify the amount but they did specify that there is a non-refundable deposit

sniper, it sounds like its more trouble then its worth. And if people didn't fully understand their mortgages, what makes you think they'll be able to comprehend the finer details of a rent to own relationship? Keep It Simple Stupid (KISS)

If anything, I think an informal, "I'll rent from you for a year and then consider buying" might be enough to get them to bite.

you could be right...and definitely the simpler the better. i know that the owners of one home are retirees with a home in Pa. that they plan on going to. it might be nice for them to have some income and one less expense if they can't sell.

i have been working with a broker for a while who has been showing me homes. what do you think their reaction will be when i tell them that i want to find out if i can rent the house?

PMG: "OnTheMove, so someone who decides not to purchase loses a $25,000 "option deposit" on top of paying rent? That doesn't sound like a very good deal, unless you are pretty serious about buying upfront."

Don't shoot the messenger! I am only conveying Shares of NY's terms. I would never enter into a deal like that, especially when it's a falling market and any deal you enter into is likely to be overpriced.

I know someone who rented their house with an option to buy in the lease. The option involved the tenant acknowledging that the house would remain on the market during the tenancy, the tenant would make the house accessible to a broker with 2 hours' notice, if the house was sold the lease would be terminated and the tenant would have 30 days to vacate, and in exchange for this the tenant had right of first refusal if they matched a third party offer for the property. Nothing came out of this option in the end.

those are pretty stringent terms but if you are the seller and can get away with them, why not. i don't think i am up for that.

>> i have been working with a broker for a while who has been showing me homes. what do you think their reaction will be when i tell them that i want to find out if i can rent the house?

100 chance they'll probably try to convince you to buy it instead. Hehe good luck with that. :)
But times are tough. It's just a part of business.

I actually don't know how you go about renting in the burbs... do you use a broker as well? And who pays?

that is a good question. i do not know the answer. i have found rentals listed on NJMLS.

of course they will try to convince me to buy it...and I will when they convince the owner to sell it to me 20% off the asking price.

i have done it once when the market it was low and i set a purchase price BEFORE the rental started, which worked very well in my favor. then i did it again when the market was high and set the price after the term was up and the market had softened. the seller balked at my offer and i walked away, they ended up taking 35% less than my offer 8 months later... so it once again worked in my favor. sniper i think this is good for you if you are smart about what how to write the contract. make sure you have a very competent lawyer who has done these types of deals before and an agent that is extremely honest and knowledgeable about these types of deals. good luck with your endeavors but do NOT sign any contract with terms that you are not comfortable with, it can spell disaster if not done correctly.

thanks for all the advice everyone

kittens - how did you get the owners to go for you setting the price after the rental period was up? and what type of market were you in? that is what i would like to do but i don't know if they would go for that.

you set the purchase price in the contract before the rental period starts, but that doesn't mean that you can't try to renegotiate it after the year is up. you should really be looking at it as the highest price you're willing to pay, not the lowest.

so it is a set price but it really isn't set in stone even though it is in the contract?

is there a "normal" percentage of the rent paid over that year that can go towards the possible purchase?

a lot of the condo rent-to-owns that i've seen do something like "if you buy in 6 months, 100% of your rent goes toward the down payment, 9 months = 75%, 12 months = 50%"

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sniper
11 minutes ago
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so it is a set price but it really isn't set in stone even though it is in the contract?

well yes and no - there's nothing stopping you from renegotiating the price, but you also have to be willing to walk away if you don't end up at the price you want!