"Rent to Own" housing question

[Weazel]

A kinda weird ad peaked my interest the other day. A young family was looking for a house a lot like mine which they could "rent to own". I've heard a lot of people doing this, but don't know the details too well. My girlfriend and I want to move into a place with more land, out of the city, so we're looking for a place anyway. But there's no way I can afford to do that if this mortgage is in my name AND lenders wouldn't consider the income coming from the 'renters' as something I could borrow against.

Basically, it's too complicated for me to grasp right now. But has anybody 'rented' a house to own? Anybody done this with a property they owned? Any information as to how it works? If I could get a fair price for my place, and have the guy pay at a modest interest rate (more than mine, of course) for 15 years (I have 14 yrs left) AND at the same time borrow money for a new house that I would actually own and live in, that'd be sweet.

I know I'm not explaining this that well, but it's definitely confusing to me too. Just wondering if anybody has seen a similar situation. Thx!!!

 

[GN One Day...]

Sure, it can be done. I don't think it's all that common for the long haul though. Too much risk. Usually, you agree to lease the property to them for a year, and at that time they have to qualify to buy it from you. If they can't/won't, you have the option to increase the lease term or have them get out so you can sell it. If that happens, don't be surprised if the house is run down, in need of maintenance, repair and worth a lot less than when you started.

As for renting and the income in regards to you loan, a lot of people do that at first. In order to show that income on your application to purchase, you have to have a renter already, who has a signed lease dated to move in on the date of your purchase. You can take the rent into account, but only 75% of it. That's standard. The other 25% accounts for cost to maintain and the risk of the renter moving out...etc. So...you may still show it as a loss, not really as income, but it will offset the mortgage on your budget. That may be enough. They'll notice if you have a crazy amount of rent on there, like you might have a friend "lease" it to get over that hump.

If you do this with someone, be sure to get an attorney to go over this with you and draw up some serious documents. Don't be too mad if these people sell the house for a profit and pay you off. There are other ways people have done this, but it may be a big can of worms with lots of potential pitfalls. Remember, if they're late, you need to be prepared to take on both house notes in case they take a hike. Might be better to get them to find a loan to get into the house instead of putting off the stress on you. Or find another buyer.

Remember, if they can't qualify for a loan, it may just be for a good reason. Don't take on a bad borrower that billion dollar companies see as too big a risk.

Just my .02