Rent-to-Own in Guelph: The Ultimate Win-Win
Hi there, it’s Adam Stewart here with Chestnut Park in Guelph, Kitchener-Waterloo & Area.
A rent-to-own strategy, also known as a “lease option” or “lease purchase” involves leasing out a home to tenants with a legal agreement allowing the tenants the exclusive right to buy the home within a certain time period.
In other words, the tenants can move into the home, pay a small down payment and monthly rent, and buy the home at some point in the near future.
This process allows the tenants time to save up the required down payment, build their credit, establish longer job history, or repair whatever is making it difficult to obtain a mortgage.
So How Do Rent to Own Homes Work?
After an acceptable tenant is found, the seller will sign the lease with the tenant, as well as the “option agreement.” Remember, it’s important for both sides to have their independent lawyer review the agreement.
The rent-to-own agreement essential states that the seller, cannot sell the property to anyone else within a specified time frame.
This time frame can be whatever is agreed upon, but typically term lengths are one to three years.
The eventual purchase price is agreed upon at this point as well, allowing the tenant to “lock in” their purchase price and setting the sales price for the seller.
The Rent to Own Option Fee
When a tenant signs the lease and option agreements, they will also be required to pay the rent, the security deposit, AND the “Option Fee.”
The Option Fee is an upfront down payment found in most rent-to-own home ownership programs. This is what separates a rent to own home from a typical rental home.
The amount depends on things like the value of the home, and available funds. This fee is non-refundable but will be later applied toward the tenants down payment when they are ready to get their mortgage.
Additionally, a rent to own home ownership program typically will set aside costs per month from the rent to be applied toward the future down payment as well.
For example, if the tenants pay $1000 per month, the sellers might want to agree to apply $100 or $200 per month toward that future down payment. If the tenants never end up buying the property – then that extra money each month is forfeited to the seller, along with the option fee.
The rent-to-own strategy’s strongest benefit is in the ability to structure the ultimate win-win for both parties.
I have clients right now looking to help tenants find their perfect rent-to-own property in Guelph.
For more information on rent-to-own, please feel free to connect at adamstewart.ca
Thanks for watching!
For further information, contact:
Adam Stewart, Realtor®
Chestnut Park West (Chestnut Park Realty Southwest Ontario Brokerage Ltd.)
Email: [email protected]
#RenttoOwn #Guelph #MoveToGuelph #AdamStewart #RealEstate #Realtor #ChestnutParkWest