Rent to own your home: Is it a good idea?

By Paul Moore

The term “rent to own” was once reserved for retail stores where consumers with poor credit could make installment payments on furniture, appliances, and electronics. But nowadays – thanks in part to an abundance of homeowners who cannot sell their houses quickly enough, reluctant banks that are not eager to finance houses, and renters who lost their previous homes to foreclosure – many homeowners are willing to work out rent to own agreements with prospective buyers.

Rent to own homes: How it works

Rent to own homes are similar to car leases. Renters pay a set amount each month to live in the house, just as lessees pay to drive a car each month. A portion of each month’s rent is income for the seller, and another portion is set aside toward a down payment to eventually purchase the home. After a set period – for example, three or four years – the renters have the option to buy the house, just as lessees have the option to purchase the car they had been leasing.

Pros and cons of renting to own

When it comes to rent to own homes, there are both pros and cons for both parties involved. Pros for the buyer include being able to get a feel for the house, the neighborhood, and area schools before making the final decision to purchase. The procedure also gives buyers more time to save for a down payment while they are living in the house.

On the flip side, buyers will lose their investment – the portion of each month’s rent that was being allocated for the future purchase – if they fall behind on payments and are evicted, if they have to move out for another reason, or if they simply change their minds. Also, the home’s value could decrease substantially between the rent to own contract agreement and the actual time of purchase.

Rent to own agreements are considered beneficial for sellers that have to relocate for work purposes and wind up with two mortgages. They receive a monthly payment that can go toward their mortgage payment on the house without waiting for the house to sell outright.

Beware! Things to watch out for

If you decide to rent to own a home, it is in your best interest to investigate the home’s purchase history and view its deed – this can be done at the clerk of the court’s office and often online. You should also ask to see several months of recent mortgage statements and receipts from the current owners to ensure they are up-to-date with their payments.

Scam artists have been known to “rent” vacant homes they do not even own, pocket the money they receive, and skip town, leaving renters in quite a predicament. Some legitimate homeowners also scam their future homebuyers by accepting rent to own payments with the promise of future purchase even though the home is in foreclosure.

Whether you are the current homeowner or the renter, it is in your best interest to have a real estate attorney create a contract to ensure that all legal avenues are covered should you decide to rent to own a home.

Paul Moore assists corporations in the booming oil regions of North Dakota, provide quality housing for the influx of laborers to the fields. See http://bakkenresidencesuites.com to find out more.

* Image attribution:  Royalty Free or iStock source: http://bigstockphoto.com

Will 2013 be great for real estate?

By Tulsa Property Management

After a number of difficult years for the real estate market, the market began to show signs of recovery in 2012. Many investors are hoping for the recent growth in the market to continue to accelerate and to make a 2013 a profitable year for the real estate market. While some growth is likely, there are a number of problems that continue to face the real estate market that investors should understand in order to make good investing decisions in 2013.

 

Fiscal Cliff

The fiscal cliff is a news story that bears watching for those interested in the real estate market. Whatever deal is struck in Washington will likely have an impact on the real estate market. Whether the deal includes raising taxes on higher income earners, the elimination or reduction of the home interest deduction or reducing federal government spending or financing in the housing market, any deal will likely impact the real estate market. Investors should stay informed of the changes resulting from any deal that the two sides make in regards to how it will impact real estate.

 

Other legislation

In addition to dealing with the fiscal cliff, Congress and the President have other issues to address that may have a significant impact on the real estate market. Expiring unemployment benefits, the expiration of the Mortgage Debt Forgiveness Act and pressure to raise capital gain rates could all cause problems for the real estate market. The extension of unemployment benefits or the Mortgage Debt Forgiveness Act will cost money that will either be added to the deficit or paid through new taxes. Low capital gain tax rates and exemptions make real estate a more advantageous investment than stocks and other investment vehicles. The only positive solution to these problems for the real estate market is for the economy to grow quickly and reduce the need for changes in 2013, but this seems unlikely.

 

Economic growth

While the fiscal cliff and legislative changes in Washington holds the potential to impact the real estate market in 2013, the market will always be primarily driven by demand. The most important factor for strong housing demand is high rates of employment and rising personal income. However, economists are predicting slow growth for the American economy in 2013, which will likely translate to slow growth for the housing market. However, with many people renting after losing homes in the mortgage crisis, there is a strong potential for these people to buy homes and fuel home sales in regions of the country with low unemployment and high income.

 

Rental real estate

As the economy continues to grow, albeit slowly, investors in the rental segment of the real estate market can expect rental rates and prices to remain strong. With the continual influx of new renters to the market (recent graduates, those who have sold or lost their homes, etc.) and slow economic growth keeping many current renters from being able to afford a home, demand for rental real estate should continue to be strong. The commercial real estate rental market should also continue doing well in 2013 for similar reasons. Landlords should be able to expect a nice return on their investment in 2013.

This article was contributed by Tulsa Property Management who specialize in Tulsa real estate and homes.

Love 'em or hate 'em: The pros and cons of HOAs

By Bruce Zander

If you live in a covenant community then it is most likely you’re very familiar with the letters HOA. The HOA or Homeowners Association is the group responsible for setting and enforcing the standards for the community. 

The HOA usually consists of a group of homeowners with sometimes the help of a management company, and the role of the HOA is to maintain consistency, conformity, improvements and conveniences in the community, and protect property values.  

All positive, right?  Not necessarily, depending on the neighbor you talked to, the HOA can sometimes be more of a nuisance than a help.  Like any situation there are pros and cons, you either love ‘em or hate ‘em. 

Love ‘em: Five HOA pros

Here are some ways the HOA gives you a reason to love them.

1. Your monthly or quarterly dues pay for the maintenance of common areas and amenities, like pools, parks, tennis courts, golf courses, club houses and more.
2. The HOA often pay for services, such as snow removal, garbage pickup, even yard maintenance. This ensures that the community will always look good and save you the stress of doing it yourself or hiring someone else to do the chores.
3. If you have a problem with a neighbor, the HOA will step in and help mediate the situation.  They can take care of any issues quickly and without any awkwardness between you and your neighbor.
4. Your property value will not plummet – in fact it may go up. With housing and economy on a rollercoaster, you can have a little comfort knowing that with a neighborhood that has standards and looks good, your property value won’t drop.
5. HOAs often host parties that bring the community together. Block Parties, holiday events and family nights are common.

Hate ‘em: The cons of the HOA

It’s not a perfect world, so there has to be some cons that go with pros. Here are five reasons residents may not like an HOA.

1. It may feel like they’re always watching you. Keeping notes on the length of the grass, what flowers your planting, or if you have a stray weed or two.
2. If you want to sell or rent, the buyers or renters may need to be “approved” by the HOA before moving forward with the transaction.
3. Dues. They can be expensive and be raised by a simple vote.
4. The HOA has the power to put a lien on or even foreclose on your home if you don’t pay your dues.
5. The HOA can be poorly run, many of the members are volunteers with full-time jobs and may not have the time to put in the effort required. There may be inconsistencies.

If you’re thinking of moving to a community that’s governed by a homeowners association, than do your research, talk to the neighbors and weigh the pros and cons of having an HOA.


Guest post created by Bruce Zander, lifestyle writer and resident of the Castle Rock community, The Meadows.