Home Buying in 91405>Question Details

Teresa Diaz, Home Buyer in 91405

Is 'rent to own' legitimate?

Asked by Teresa Diaz, 91405 Thu Mar 24, 2011

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You need to consider the source. There are certain zip codes doing much worse than others. I'm certain the Van Nuys ares is much more viable than Vegas right now.
0 votes Thank Flag Link Thu Mar 24, 2011
Can you clarify your question? Yes it can be based on the transaction and State law(s)

Lynn911 Dallas Realtor & Consultant, Loan Officer, Credit Repair Advisor
The Michael Group - Dallas Business Journal Top Ranked Realtors
0 votes Thank Flag Link Thu Mar 24, 2011
In Las Vegas, only 10% Rent to own ever achieve ownership. That's a 90% failure rate. Legitimate? YES!
Smart? NO

David Cooper Las Vegas Foreclosure Investor for Cash Flow Houses. FReee List +1-7024997037 davidcooper@lasvegaswinner.org not a real estate agent
0 votes Thank Flag Link Thu Mar 24, 2011
I've been doing L/O's for years on Manufactured Homes and it works beautifully. It's can be a win win. It gives the lessee some pride of ownership and gives the lessor some piece of mind in knowing that someone will be going above and beyond to care for the property.

But as Melody stated, now may be a precarious time to do that inasmuch as the market is still somewhat volatile and no one really knows where rock bottom is yet. You might be better off just renting for awhile but do bear in mind that a lease option can be negotiated for as little as a dollar.
0 votes Thank Flag Link Thu Mar 24, 2011
Saw an interesting article today about Rent vs Buy ... have fun reading


Read more: http://www.sfgate.com/cgi-bin/blogs/ontheblock/detail?entry_…

One financial expert's opinion: home ownership = horrible investment

We hear a lot about why we should buy homes, reasons based in both logos and pathos. Logos: the tax write offs, the building of wealth, the return on our investment; pathos: no more landlord, the American Dream, "success" and "stability."

Well, not everyone agrees that home ownership equals wealth and happiness, and it's not the sour grapes of a bitter San Francisco renter pretending to enjoy the fact that s/he is permanently priced out of the market (i.e. me). No, this opinion is that of James Altucher, managing director of Formula Capital, an investment guru and author of the definitely quirky-- but also definitely intelligent--blog, Altucher Confidential.

His reasons

Altucher lists many reasons for his article entitled "Why I am Never Going to Own a Home Again." He agrees that stock in housing related companies is a great idea right now, as prices are at an all time low. But as for buying a house, though there too one could point to lower prices, Altucher argues this one of "the worst" investments an American can make. His top reasons are both personal and financial, and knowing SF Gate readers, bound to stir debate.

The personal reason Altucher brings up is stress: buying a home can be physically and mentally draining for people, can even ruin relationships. But some people enjoy the process, and certainly not every house-buying couple ends up split; so this argument is highly individual. More compelling are his financial reasons. They are quoted below:

"A) Cash Gone. You have to write a big fat check for a downpayment. "But its an investment," you might say to me. Historically this isn't true. Housing returned 0.4% per year from from 1890 to 2004. And that's just housing prices. It forgets all the other stuff I'm going to mention below. Suffice to say, when you write that check, you're never going to see that money again. Because even when you sell the house later you're just going to take that money and put it into another downpayment. So if you buy a $400,000 home, just say goodbye to $100,000 that you worked hard for. You can put a little sign on the front lawn:"$100,000 R.I.P."

B) Closing costs. I forget what they were the last two times I bought a house. But it was about another 2-3% out the window. Lawyers, title insurance, moving costs, antidepressant medicine. It adds up. 2-3%.

C) Maintenance. No matter what, you're going to fix things. Lots of things. In the lifespan of your house, everything is going to break. Thrice. Get down on your hands and knees and fix it! And then open up your checkbook again. Spend some more money. I rent. My dishwasher doesn't work. I call the landlord and he fixes it. Or I buy a new one and deduct it from my rent. And some guy from Sears comes and installs it. I do nothing. The Sears repairman and my landlord work for me.

D) Taxes. There's this myth that you can deduct mortgage payment interest from your taxes. Whatever. That's a microscopic dot on your tax returns. Whats worse is the taxes you pay. So your kids can get a great education. Whatever.

E) You're trapped. Lets spell out very clearly why the myth of homeownership became religion in the United States. It's because corporations didn't want their employees to have many job choices. So they encouraged them to own homes. So they can't move away and get new jobs. Job salaries is a function of supply and demand. If you can't move, then your supply of jobs is low. You can't argue the reverse, since new adults are always competing with you.

F) Ugly. Saying "my house is an investment" forgets the fact that a house has all the qualities of the ugliest type of investment:

1.Illiquidity. You can't cash out whenever you want.

2.High leverage. You have to borrow a lot of money in most cases.

3.No diversification. For most people, a house is by far the largest part of their portfolio and greatly exceeds the 10% of net worth that any other investment should be."

.....All that and stress too? Is it time to rethink the American Dream?

Read more: http://www.sfgate.com/cgi-bin/blogs/ontheblock/detail?entry_…
0 votes Thank Flag Link Thu Mar 24, 2011
Not a great idea in this market. When you rent to own the sales price is generally agreed upon up front. With current market conditions it is possible that prices may go down in the future and interest rates may go up! Depending on your qualifications you may not qualify for a loan at the end of the term. If you can qualify for a purchase, NOW is the time to buy!
0 votes Thank Flag Link Thu Mar 24, 2011
I disagree, This is one of the best ways to buy a property, you get to lock into a price at the start. You work with the seller about how much of your rent goes towards your down payment. ( now there is a new lending law about how much is allowed) But What could be better, even if the house or condo is not listed with a lease/ option you have to ask. And lock into todays value and see how you like it, Let the owner take care of all the problems while you live there. And if the value goes up you have a contract at the agreed price. and if you decide to not buy, you walk away and lose nothing.

Shawn Daly
0 votes Thank Flag Link Thu Mar 24, 2011
Lease-options (aka rent-to-own) are legitimate, and are great for some, but they're not for everyone. I like to use them (and other forms of creative financing) to buy/sell property. Yet, the arrangement is only as good as the paperwork.

If you're thinking about entering into one of those arrangements, then you probably should have an experienced real-estate attorney (ideally who also is an investor) review your paperwork.
0 votes Thank Flag Link Thu Mar 24, 2011
Rent to own is not a common transaction, but it is being used more often today because some buyers with marginal credit cannot get loans. Like any residential transaction, you should read the agreement and talk to a lawyer if you have any questions. If you don't think you can live up to the requirements, then you should not enter into the agreement. Otherwise, it may be a good option for you.

Ron Rovtar
0 votes Thank Flag Link Thu Mar 24, 2011
If you have a down payment stored away you can also consider seller financing if the owner is willing.
0 votes Thank Flag Link Thu Mar 24, 2011
It is legitimate bought probably not in your best interests.

With rent to own you need to come up with "option money" that is non-refundable if you choose not to proceed with the final purchase in 1yr or whatever the terms are.

Instead of doing a "lease option", get into a rental where the owner IS considering selling in a year or less & simply add this clause to your lease agreement "Tenant shall have the First Right of Refusal". This way there is never any Option money that you could lose.

562-430-3053 cell
Realtor Since 1996
0 votes Thank Flag Link Thu Mar 24, 2011
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