[home buying] Lease to own?

B

BoomBoxing

Veteran XV
My crappy apartment's lease is up in May and I am considering the next move. This apartment was my first place and although it is ok I want something a bit nicer. I have really good credit but I am not 100% positive I could afford a down payment on a house, or if I even really want to do that at this point. Instead, I have heard lease to buy is a good option, where you lease a home for 1-3 years and a portion of rent is put toward a down payment. It seems like a really good option, however the obvious downsides are wasting rent money if I don't buy or losing out if the home value depreciates.

Smart, stupid, or are there better ideas out there?
 
If you're planning on buying a house to live in, why do you care if it might drop in value? I mean other than the fact that you would have paid less had you waited for the drop, of course.
 
If the home depreciates while you are leasing it you are paying more than it's worth while leasing, but I assume you pay current market value at time of purchase. I'm not positive about all of that though that's why I'm asking.
 
BoomBoxing said:
If the home depreciates while you are leasing it you are paying more than it's worth while leasing, but I assume you pay current market value at time of purchase. I'm not positive about all of that though that's why I'm asking.
Click to expand...

Well how's that possibility different from signing a lease on an apartment and then having the apartment value drop while you're in a locked in year (or more) contract? I'm just pointing out that I see no difference in this regard with renting.
 
borlaK said:
first, do you really need a house? they are a lot of extra money and work, not just the down payment and closing cost...

but if your mind is already made up..

there are (or were) options for first time homeowners where you don't have to pay the full 20% down. can you pay 5% down?

also look at foreclosures. this is the time to get one :p lots of really nice places being foreclosed...

I can't really comment on leasing but I'd say just by default, that if you have to look for alternative ways of owning a house, then it's probably not the right time ;)
Click to expand...

Well nobody really "needs" a house, but I think long term it would be smarter than renting. Whether that's media hype or not is debatable but there's no doubt there are a lot of distressed properties you can get a good deal on. I could do 5% down and I have really good credit so that is certainly feasable, but I have read that even if that's the case lease to own is still a good option due to not being liable for home repair and such (while leasing obviously).
 
I just sold a rent to own house in NC.

Things to consider:

1. The sale price is usually set the date you start the lease, so if you set the price today, and in 5 years its worth more, good for you, worth less you will have to fight the bank for financing.
2. You usually take over ALL maintenance of the house once you sign the lease, so make sure you get an inspection and get shit fixed first.
3. The amount of extra money you put aside for the down payment is totally up to you but a minimum will be set when you sign the lease/offer to purchase.

I leased mine for 8 years before they finally bought, it was a huge pain in the ass being that I was no where near the property and had to hire a "Property Manager" to look in on things and collect rent. They were also responsible for setting up the "trust" account where the down payment money went.

It worked out well for the tenants, sale price was set at 189,900 in 2000 and the house was valued at $215,000 when it sold, so they had some instant equity.
 
I'd also check and make sure that if the home has had improvements (additions, bathroom remodels, new roof) that you check with the building department and make sure all that crap was permitted and the permits were closed out (ie. passed inspection).

With the market sucking there are a lot of people just doing shit themselves with no contractors and no permits and once you buy it the building dept goes after the current owner. Also, if something is not up to code it can affect your homeowners insurance.

Another tip is to hire your own inspector and not the one the Real Estate recommends. The agents home inspector is going to overlook a lot of issues because if they are too alarmist, the house won't sell, the agent doesn't get a commission and then that inspector gets a bad rap and doesn't get refferals anymore.

Check with your State's construction licensing department and see if inspectors need to have a license (most state do not). If there are no licensing requirments any Joe Blow can say they are an inspector. Best bet is to find a licensed residential home builder that's not a dumbass (heh) or at lease someone affiliated with Home Inspector | Home Inspection | Licensed Home Inspector | Home Inspector Association | NAHI because they have to take continuing education on current codes to keep their license/certification.
 
Ok, for the young. You have to figure out how long you're going to live in the area you are in. If its more than 12 years then, yes buying a home is better than renting. Make sure you like your job. Missing mortgage payments is nothing like missing the rent. Be prepared for added bills such as water/sewage/garbage and home maintenance. Don't buy the maximum house you can afford. Pay extra premiums early and often. The more you pay on the premium the less you pay in interest and faster you gain equity.
 
You must log in or register to reply here.
Back
Top