Sometimes, home builders run into trouble trying to find someone to purchase a home as fast as they want. In this scenario, they could increase the odds of selling if they throw out a Rent-to-own option to people who are looking to purchase one. They might sound like this:

Are you like a typical homebuyer who will most likely need a mortgage before you can finance the purchase of a new property? If you are in this category, I hope you have good credit, and the cash for a down payment is readily available. If you don’t meet these two criteria, the normal route to owning a home might not suit you right now. What if I had something easier? An alternative; the Rent-to-own agreement. 

In case you’re not familiar with this method of homeownership, let me lay the foundation for you…

What is a Rent-to-own Agreement?

This is a scenario where you rent a home for some time, with the option to buy the house before the lease expires. A typical Rent-to-own agreement comprises two main parts:

  • A standard lease agreement
  • An option to buy 

 Before we get into the details, you need to know who this is for and who should try out the traditional method.

Who Is Rent-to-own for? 

This option is for folks who do not meet up with typical traditional bank loan requirements. You must, however, make a decent income and have a down payment ready. People in this category are usually tired of renting apartments and want a place to call their own home. 

Who is Rent-to-own NOT for? 

If you can get home through the traditional bank financing system, you are encouraged to do so first before considering this option. If you don’t have any money for a down payment, this option is not for you. Rent-to-own is also not for people who are in a hurry to move(less than 30 days).

Benefits of Rent-to-own to buyers.

  • Requires a lot less deposit to get started compared to a typical traditional 20% down with a bank loan
  • Individuals with fair credit and job history can own homes through this means.
  • You can build equity as you live in the home.
  • You can lock in a purchase price at move-in!
  • You have the option to quit and not purchase the home at the end of the required period in case it turns out not to be the right place for you.
  • Monthly payments are checked off as a credit back to you. What this means is that part of your money is invested in your home.

So, now that we’ve had the recap on what a Rent-to-own agreement is all about. If you’re into the home building business and lack customers, you need to scale it. You can tap into a pool of individuals who didn’t qualify for the typical mortgages from banks. It comes with the following advantages to you:

  • Easy maintenance: People who opt-in for Rent-to-own are not looking for a place to crash for a few years but a place of their own, and they are likely to keep it in one piece than ordinary tenants.
  • If they decide not to go for the property again, you get to keep all the extra money paid as the purchase price for yourself. This way, you make more money selling the place than most home builders would. Although it is a bit of a gamble, it

Before you go…

So, if you’re into the home building business and you’re short on customers, this option is quite profitable for you rather than losing valuable time. Although you’ll have to bear risks if you decide to venture into this form of home selling. 

The downside to Rent-a-home is that you’ll not be able to get a huge check like the traditional home selling but, in this Case, you get to earn returns on the home without waiting for long.

In the third week of April 2020, there were only 48,965 new home listings, down 50% when compared to new listings in the same week of April 2019. (Redfin, 2020)

I hope this article was sufficient to enlighten and answer all questions you might have on Rent-to-own opportunities for Homebuilders.