Suppose you’ve dreamed of real estate riches along with dreaming of being in the position to help out those who have hit a few bumps in the road along the way but are generally good people fallen on hard times. In that case, you may want to consider a type of real estate investing in which you purchase properties and then work out a lease to own agreement with people who, for one reason or another, cannot get the financing to buy their own properties right now.
This type of real estate investing is a great way to make money while helping out your fellow man, and there are many other benefits to this type of arrangement. First of all, traditional renters have no stake in a property. For this reason, you will often find that renters have little regard for the damage done to the property beyond how it affects their security deposit (FYI, requiring a security deposit is not permitted in Ontario). However, those who have hopes of someday owning the property are much more inclined to take great care of the interior and exterior of the home they are renting. This means that the chances are good that the value of the property will actually improve during their tenure whether they ultimately decide to purchase or not.
A lease to own strategy also benefits you because these properties are often in high demand and will fill up more quickly than the average rental property should the house’s sale fall through for whatever reason. Common reasons for sales falling through are work-related transfers, divorces, and an inability to get financing even with the money saved to go towards a down payment. The good news is that even if the sale falls through, you can try again, and the house isn’t likely to sit empty for very long.
The benefits to those leasing from you are many. First of all, you will be putting a predetermined and agreed-upon sum of each month’s rent towards their down payment at the end of the (again) previously agreed upon amount of time. This allows them to save the down payment money without really consciously thinking about it each month. This agreement also allows them a little more leeway for making improvements, painting to taste, and decorating than your typical rental home.
Another big benefit to those leasing to own is that it gives them a certain amount of time, typically two years, to get their affairs in order and work on improving their credit, saving money, and taking other positive steps towards their dreams of home ownership. They also get the opportunity to see how they like living in the home in question. Many homeowners would love to have had a two-year trial on their homes before making the final commitment. They have an opportunity to learn about many of their neighbors, the local schools, the local commute, shopping, and entertainment, among other things. These things are all excellent factors for those leasing to see and enjoy first hand before making the absolute commitment to purchase the property. It also happens to keep money filling your pockets month after month with excess paid to go to the down payment reverting to you if they decide not to purchase after two years (or the agreed-upon time frame).
Some have difficulty deciding to go the lease to own route when it comes to real estate investing. For whatever reason, they feel that it is taking advantage of some people, and that is something you’ll have to wrestle with on your own. Truthfully speaking it is a service that many people wish was offered much more often than it is and can be a huge help to those who are experiencing a bit of a rough patch but otherwise have always been on time with payments and are, at the core, good people who deserve a break. You can quell the feelings of taking advantage by offering a fair price on an arrangement that has the potential to be mutually beneficial.