How Rent-to-Own Can Scam Your Money and Time

You’ve probably heard or seen rental property ads online as a potential solution to not being able to afford a home. , and striving for a home that never became theirs.

What is Rental to Own?

rental A special type of contract in which you plan to own the home after a period of time agreed with the seller. Think of it like a car lease that gives you the option to buy just before the lease expires. If done right by both parties, this option could be a profitable deal for the parties involved. But the rental housing market has had some bad apples that have taken advantage of many who were hoping to become homeowners.

What are the risks?

Most contracts for rental housing are much less forgiving than the traditional rent or purchase leases we are used to seeing. People sign contracts of conduct, and buyers buy contracts of conduct, not the conduct itself. If the borrower fails to perform the details of the deed in writing, the contract is breached and the seller has every right to evict you and retain all shares you have placed in the home.

in 21 years study Less than 20% of prospective buyers became homeowners, according to a study conducted by the Texas Department of Housing and Community Affairs. Nearly half of them defaulted on their payments and canceled their contracts.

According to a recent report from Atlantic, many incidents of being cheated in a tenancy situation arise from a lack of understanding of the process. Many tenants think the home will be theirs, so they typically “invest” large sums of money in improving their homes. This is usually because many rental homes are ‘fixer-upper’. That is, not in the best living conditions. Tenants can then default on payments and be in breach of contract. What you end up with is a really nice house that the landlord still owns and has a big hole in your pocket.

How to rent the right way:

• read the contract. It sounds basic, but I couldn’t stress enough. Make sure you understand the parameters you are asked to work with and the penalties for violating them. In the contract, it is necessary to confirm the price of the house, the rent, the deadline for purchasing, etc. Make sure the contract states what percentage of the rent will go towards buying the home and how those payments will be made.
• Pay attention to the eviction wording. Don’t put yourself in a position where the conditions could easily evict you, especially after you’ve invested in your home through maintenance, improvements, or equity investments. If you get kicked out, make sure you’re compensated for your contributions in some way.
• Let the lawyer read between the lines. Needless to say, most of us are not trained attorneys who know how to read technology lease agreements. Spending money to have someone look at it and get feedback is well worth the investment considering you have a multi-year contract that costs thousands of dollars.
• Focus on mortgages. When you know you’ve reached an agreed-upon time to buy a home, be prepared to purchase the property with a mortgage. In this way, you get out of the dangerous tenancy agreement and become the owner of the house.

Rental housing can be an excellent option for those who want to be homeowners but cannot compete in the market or qualify for a traditional mortgage. It may seem like a solid choice to live out the American Dream, but make sure you’re not signing a contract that would make you an American Nightmare.