We all know how a traditional real estate purchase works. First, the house seller accepts the interested buyer’s offer. Then, they exchange funds and settle the final costs. Finally, the transaction closes.
Unfortunately, not every Houston resident has the financial muscle needs to make such a direct purchase. That’s why you’ll find most of them working with mortgagors in Houston, Texas. But there’s an alternative to that. if you’re interested in investing in my Houston home but you don’t have enough funds, you can opt for the rent to own option. What’s a rent to own option? How does it work? And more importantly, do we have any downsides related to it? Let’s all jump right in!
The definition: rent to own
Also known as the lease to own agreement or simply the lease option, the rent to own option is a real estate investing option that allows potential buyers to make purchases down the road based on a signed agreement between them and the property sellers.
So basically, this is a binding agreement that allows the buyer to stay in their dream home as tenants and later on make the purchase. If you’re the buyer, you can live there for 1-3 years while paying rent as a normal tenant, and claim ownership once you’ve paid the remaining amount.
By the way, the seller cannot go back on their word and put the property up for sale once the contract is signed. They can only list the property if you tell them that you’re no longer interested in it.
In the contract, the tenant pays the seller a one-time lease option fee commonly referred to as the option money. This fee is normally non-refundable, and it gives the tenant (buyer) the opportunity to buy the house in the future. It’s also important to note that there’s nothing like a standard rate for this fee in Houston, Texas. All we can say is, it ranges from 2.5 % to & 7 % of the property’s purchase price.
as the tenant, you’ll be forced to pay a specified amount of money as stated on the contract. A potion of your monthly rent payment may be applied to the buying price. And we use the word ‘maybe’ here because that’s not always the case. For example, let’s assume that you have agreed to pay 1,200 dollars monthly rent, and 25 percent is credited to the buying price. If the period stated on the contract is 3 years, you’ll have earned 10,800 dollars rent credit.
Depending on the agreement, you might be responsible for the annual taxes, cost of repairs, insurance, and maintaining the property. But that’s not always the case. Sometimes, it’s the seller who pays the insurance and taxes as they are still the legal property owner.
Do you wish to learn more about rent to own in Texas? Call us, today! We will help you buy that dream home you’ve been eyeing for years.