Rentals in Cincinnati>Question Details

Brandie Gras…, Home Buyer in New Richmond, OH

do you suggest that as a 23 year old to look at a rent to own option or to look at apartments?

Asked by Brandie Graser, New Richmond, OH Sun May 5, 2013

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Good evening Brandie,

Rent To Own is a better deal for the Seller than it would ever be for a potential Buyer.

The basic concept is finding a way to "force" savings towards a down payment by including a portion of the monthly rental that goes towards that savings. You pay your rent every month and your Landlord deducts a pre-determined amount to hold in a special bank account, called an "escrow" account. Your Landlord holds that money until you have saved up enough---through this "forced-savings" method---to meet a down payment to purchase the home.

The terms of the purchase price, including the down payment amount, and the amount to be set aside from the rental for down payment, are all set down at the time of lease signing.

It's all about helping the renter/tenant save up enough money for a down payment to buy a home (in this case, the one you're renting). But this is a better deal for the Seller because he gets to lock in a purchase price and a buyer today for a future sale.

Saving money for a down payment? Well, heck, you can do that on your own.

If you are dedicated to the idea of buying your own home, you can create your own savings plan to save up enough money for a down payment. And when you have saved up enough for a down payment, if that takes a year or two or more, YOU get to decide on the price you're willing to pay for the house at that time based on current market conditions. You won't be locked in to a price that may be a lot higher than what the house is worth in the future.

With Rent To Own you'll be locked in both to the house and to the price, even if it takes you 3 years to save enough through the forced savings of the rent payments. What happens if three years from now your life situation has changed? Maybe you need a bigger/smaller home. Maybe your employment has relocated. Maybe your credit or income is insufficient to qualify for a mortgage loan.

Find a way to save up on your own; not with Rent To Own.

Sit down with a local Mortgage Banker and get yourself prequalified, too. You may find you're better qualified than you think you are, and, if you're not, at least you'll know how much loan your income and credit qualify you for, and how much you have to save towards down payment and closing costs.

Trevor Curran
NMLS #40140

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0 votes Thank Flag Link Tue May 7, 2013
Does your area do contract for deed as an option if a mortgage with a financial institution is not possible? Interest rates are very good. If this person is responsible and ready to make this investment, it is opportunity time even if they are 23.
0 votes Thank Flag Link Mon May 6, 2013
Rent to Own or "Lease option to buy" as they are commonly called are an attractive way to purchase a property when down payment is an issue. Generally speaking the amount of rent you pay in a Lease option deal is higher than it would normally be without one. This is due in part because when the Lease option reaches the end of it's option period you will be required to obtain a mortgage assuming you need one. Most lenders will only credit the difference in what is considered to be the "market rent" on the property and the amount you are paying as qualified down payment. For example if you enter into a Lease option with a monthly lease payment of $1,000/month for three years and the market rent for that property as deemed by the Lender's appraiser is $800/month then you would receive a $7,200 toward down payment. This is of course also dependent upon the Lease option agreement between you and the seller spelling out the same terms. The $7,200 in this case is essentially being taken out of the proceeds of the seller.
I would definitely recommend that you hire a qualified Real Estate attorney to prepare the Lease Option agreement.
0 votes Thank Flag Link Mon May 6, 2013
Hi Brandie...

A rent to own arrangement is an option but prior to giving one serious consideration you should do some additional investigation. The term "rent to own" make this sound simple and easy but it's far from that.

Here are some things to consider....Buyers going this route generally lose their ability to negotiate the price, sellers quite often inflate their price, seller generally require a large non-refundable deposit, contracts that are drawn up by the seller's representative usually favor the seller, etc.

A rent to own option is always a possibility but whether or not it is a GOOD opportunity largely depends on the terms available.

Our recommendation....proceed with caution!

Good luck,

0 votes Thank Flag Link Mon May 6, 2013
RTO is a good way to go if you fully intend on converting to a mortgage within 24 months. Happy to discuss further
0 votes Thank Flag Link Mon May 6, 2013
Buy outright with these amazing rates! I am a landlord and applaud my tenants when they can buy a home of their own, and I help them any way I can. There is not much rent to own these days with houses selling so quickly.
Tracy:, 513-404-0801 text/call
Call, text or email if you have more questions. That was a great question to post on Trulia, by the way. Sounds like you are an educated buyer!
0 votes Thank Flag Link Sun May 5, 2013
i certainly agree with all the answers given but would like to make one more point: at 23 are you responsible and knowledgeable enought to take care of a house. Some young people are and some are not. I raised 3 daughters and only one would have been responsible enough. Only you can answer that question, (perhaps with the help of older relatives if available.)
0 votes Thank Flag Link Sun May 5, 2013
Talk with a loan officer to see what it will take to qualify for a loan. Save about $10-$20K to get a conventional loan. Avoid a FHA loan.
If you find a home to lease purchase you may be responsible for all the maintenance on top of the payments.
0 votes Thank Flag Link Sun May 5, 2013
Hi Brandie,
There are some important considerations.
Do you plan to stay in this general area for at least 3 years?
Have you considered getting pre-qualified by a lender to know what you might eventually afford. If you got a lease/option, you would want to know that you will qualify to purchase at some point. It appears that you now live in New Richmond.
Actually, I grew up in New Richmond and would like to meet with you at my office to discuss other possibilities in getting the right start.
You may call me @ 513-543-6856.
Jerry Smithson
Keller Williams Advisors
0 votes Thank Flag Link Sun May 5, 2013
Brandie rent or buy a home with a loan. Unless you have money to burn (make it rain Bens)!
i have a few good lenders that can help preapprove you for a loan if you want.
0 votes Thank Flag Link Sun May 5, 2013
In this market I would recomend buying. Prices are still relatively low, and interest rates just went down again. However, everyone's situation is different. Email or call and let me know why renting or renting to own is what you are considering instead of buying. We can help with all 3.

Michael Teggart
Comey & Shepherd Realtors
Web Reference:
0 votes Thank Flag Link Sun May 5, 2013
There are a lot of factors to consider to answer that question. The first consideration is do you want to own or rent. If you expect to live in the property for a long tome and it will fit your needs, buying is a good option. You can normally buy for less than renting.

If you feel your needs are likely to change soon or you may be moving to another area for some reason, rent. If you decide to buy, you can then consider whether to buy now or rent to own. Buying now is a good option in you can as interest rates are low. If you cannot buy now but still want to own, look at the rent to own options.

There are several considerations for rent to own choices. You can lease/purchase, which meant you are agreeing to purchase and they you just want some time to get things ready before you are ready to purchase. Lease/option is a good choice when you are not sure. You have the right, but not the obligation to buy the property. You will usually put down an option deposit that will apply to the purchase price if you choose to buy during the option period and you will lose this deposit if you don't buy for any reason.

Let me know if you have other questions.
0 votes Thank Flag Link Sun May 5, 2013

I am sure everyone will have a different opinion on this but my personal opinion is that there aren't alot of "rent to own" options available out here and instead of spending alot of time and energy on those, I think it would be better to just rent an apartment, save money, and then when the time is right for you..... look to buy! If I can answer any other questions, contact me at 513-347-1858 or Have a great rest of your Sunday.
0 votes Thank Flag Link Sun May 5, 2013
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