Lease to own real estate is an option for credit problems plaguing people across the globe. These problems can lead to many other problems. Such problems include difficulty purchasing vehicles, getting jobs, opening checking accounts, and purchasing or renting a home. For those who are experiencing credit problems, hope seems like a long lost commodity. It especially seems lost when it comes to the American dream of owning a home.
To the Rescue
The good news is that there are some savvy investors. These investors are sometimes willing to take the risk on those who have had credit problems. They will usually want to see that they are attempting to get their lives back in order. The bad news is that it often comes at a rather high price to the consumers. Getting into trouble with credit takes a while to recover. For many, the process is long and filled with pitfalls and missteps along the way. Then there are those that are living the nightmare of poor credit. There are times in which the situation must seem hopeless.
For this reason investors that offer to lease to those with less than spectacular credit are often viewed as saviors. They are taking a risk that others are unwilling to take on a person. In other words, many would find that they are justified by charging a higher price or interest rate than traditional lending institutions will charge. After all, it is their money that is on the line if the lessee decides to default on the contract. It is also their money that will be required to make any repairs that will be needed.
Making it Work
For investors who are interested in ‘buy and hold’ investing, this is one way of making that system work. Many times the ‘buyers’ will find another property after a couple of years and will have essentially rented the property for a specified amount of time. At other times they will seek alternative financing once they have been able to straighten out their credit situations. Either way there are many occasions when the property is returned to the investor. By then it has turned a relatively decent profit while housing those who took some degree of ‘pride of ownership’ in the property.
More Than One Way to…
There is more than one way that a lease to own deal can work. The most common however, is that there is a specified amount of time, typically 2-5 years, in which those that are leasing the property can live in the property. A portion of the monthly lease being applied towards a down payment for the property once they are able to get traditional financing. If a twenty percent down payment is achieved during that time, the odds of them being approved for a loan are greatly improved. If they (being the lessees) combine this opportunity with serious efforts to improve their credit scores then there should be no problem achieving this.
As a real estate investor, this situation is so much more attractive than renters for many reasons. First of all, the maintenance in these cases becomes the problem of the lessees rather than the owners problem. You have ‘renters’ that are hoping to have ownership of the property in time. You can charge a little more each month for rent in order to cover the money being applied to the down payment.