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Rent to own
Posted on 7/2/25 at 2:08 pm
Posted on 7/2/25 at 2:08 pm
Looking at a home to rent to own. How does that work? I know the mortgage stays in the owner’s name. Can the owner just suddenly kick you out and you lose your money you’ve been paying in? If the rent is $1500, how do I know the whole amount is going to the loan and they’re not keeping part of it and it adds years to the loan? I’m assuming the renter has no access to the loan to see how much left is owed year by year.
11
Posted on 7/2/25 at 2:19 pm to tigger4ever
Think about this for a minute.
Name one person or scenario you've ever seen in life where a person rented to own a house and followed through with it.
You won't find a situation with anyone you talk to.
It's basically a scam.
Name one person or scenario you've ever seen in life where a person rented to own a house and followed through with it.
You won't find a situation with anyone you talk to.
It's basically a scam.
Posted on 7/2/25 at 2:22 pm to FnTigers
If it’s written up legally the owner is not bound to it?
Posted on 7/2/25 at 2:25 pm to tigger4ever
quote:
If it’s written up legally the owner is not bound to it?
The whole rent to own practice is predatory hugely favoring the landlord to charge more than you would to rent with payment terms you more than likely will not meet thus voiding the contract and relieving you of all the money you were renting with.
Posted on 7/2/25 at 2:30 pm to tigger4ever
we sold a home Bond For Deed. the buyer ( a family friend, never do this lol) put a very small down payment, I think they paid a service that paid the mortgage every month. At the end of term all of the principle they paid was supposed to go to their down payment. I think it was for 2 years. Well at the end of 2 years they couldn't get financing. I had every right just to move on and keep their money but I gave them a couple thousand back to use for moving expenses and deposits on another place for them to rent. It wound up ok for us because we had sold it to them for $220k. When they were done we were going to put it on the market but someone came along and offered us $250k no commissions or inspections.
BUT this was all done in 2016 and was really the dumbest money move I have ever made I think. The house is now worth about $430k. We should have kept it but had just jumped up a bunch in lifestyle and income and were a bit nervous about the future.
BUT this was all done in 2016 and was really the dumbest money move I have ever made I think. The house is now worth about $430k. We should have kept it but had just jumped up a bunch in lifestyle and income and were a bit nervous about the future.
Posted on 7/2/25 at 2:32 pm to tigger4ever
Usually rent to own situations are preying on unsophisticated individuals and typically end up taking advantage of them due to the terms of the contract
Posted on 7/2/25 at 2:34 pm to tigger4ever
quote:
If the rent is $1500, how do I know the whole amount is going to the loan and they’re not keeping part of it and it adds years to the loan?
The loan is in their name, they have the right to pay as little or as much as they want, as long as they are meeting the minimum monthly payments. Do you think they would sell a house to you without some sort of profit if the market justifies the mark-up?
quote:
I’m assuming the renter has no access to the loan to see how much left is owed year by year.
If the loan is in the owner's name, and they are the guarantors of the loan; then the renter would have no access. With that said, you may be able to make access to view a condition of the sale.
quote:
Can the owner just suddenly kick you out and you lose your money you’ve been paying in?
Short answer is no; they cannot just suddenly kick you out. There are renter laws in place to keep this from happening. With that said, if you get evicted from your apartment, are you expecting some sort of return on your rent payments? Rent to own houses are a little more complicated, and there are ways to recover some of your rent payments; but your mortgage documents would need to spell out the difference between your monthly payments and the fair market value for the rent. Then you may have a shot at recovery of some portion of the payment
Posted on 7/2/25 at 3:17 pm to tigger4ever
quote:
Looking at a home to rent to own. How does that work?
Usually if someone is looking to do a rent to own deal, its because the renter-buyer can't qualify for a regular mortgage just yet. Could be a number of reasons like they started a new job and need a few more months of being at the same company in order to get underwriting approval for a mortgage. Maybe they had a previous foreclosure or bankruptcy that it hasn't quite been a long enough time since then for approval on a new mortgage. So rent to own deals allow them to move into the new house and rent it from the seller temporarily until they resolve whatever issue is keeping them from getting traditional financing through a bank.
quote:
If the rent is $1500, how do I know the whole amount is going to the loan and they’re not keeping part of it and it adds years to the loan?
How would it add years to the loan? The owner would still have to make their regular mortgage payment every month, so the amortization and payoff schedule doesn't change.
And why shouldn't the owner be charging a rent amount that covers the mortgage and leaves a little extra for him to keep. He's got a lot more risk than you do. The owner has the risk of having to come out of his own pocket to make mortgage payments if the tenant falls behind on rent payments or if you back out of the rent to buy deal and move out. The owner is the one who would have to come out of pocket if the AC goes out or if some other repairs need to be done or for an insurance claim deductible. If the landlord isn't charging a higher rent than what the mortgage payment is, then he's going to cash flow negatively on the property because maintenance costs and repairs are a reality.
Posted on 7/2/25 at 3:38 pm to tigger4ever
Think about this...if the owner of the home falls asleep at the wheel and kills someone and that person's family sues and is awarded $10 million and the landlord has a judgement against them for all their assets, who do you think gets the house and/or proceeds from the sale of it?
Posted on 7/2/25 at 4:16 pm to REB BEER
quote:
Think about this...if the owner of the home falls asleep at the wheel and kills someone and that person's family sues and is awarded $10 million and the landlord has a judgement against them for all their assets, who do you think gets the house and/or proceeds from the sale of it?
The deeded owner can lose the home, but any new owner would still be subject to the contract with the rent to own tenants. (Same thing if the deeded owner decides to sell 5 years into the contract - the new "owner" would still have to abide by the terms of the contract)
Rent to own is a terrible idea for pretty much all involved, but your scenario is the least of anyone's worries.
Posted on 7/2/25 at 5:31 pm to FnTigers
quote:
Name one person or scenario you've ever seen in life where a person rented to own a house and followed through with it.
You won't find a situation with anyone you talk to.
It's basically a scam.
I actually work with a guy who did that when he was 19. By the time he was about 40 he owned the house. I thought he was full of shut until he showed me the papers
Posted on 7/2/25 at 7:18 pm to TigersHuskers
quote:well that's a first. Lol. Extremely rare.
actually work with a guy who did that when he was 19. By the time he was about 40 he owned the house. I thought he was full of shut until he showed me the papers
Posted on 7/2/25 at 8:04 pm to tigger4ever
Usually something like have to put down 10% min, and write in contract if you are a day late, etc….
Then voids the sale
Or something Like that
Then voids the sale
Or something Like that
Posted on 7/3/25 at 5:37 am to tigger4ever
In Louisiana, this is called Bond for Deed. You can google that and find info on pros and cons.
It's a form of owner financing that is used mainly when the buyer has terrible credit and can't get a mortgage loan or when the property has shaky title or maybe repair problems to the point that a mortgage company would not make a loan on it. It's a last resort that most folks do not recommend.
I believe, but am not 100% sure, that if the buyer defaults on the payments, say after several years, the seller can cancel the contract by giving proper notice, and the buyer loses out on any "equity" like he would gain under a traditional mortgage. Pack up, hit the bricks, you get nothing. The seller can also keep any improvements made by the buyer without reimbursement. Perhaps the bond for deed contract could include terms on such issues to protect the buyer, but without them he's probably in a vulnerable spot if he defaults on payments.
Louisiana law has some special provisions for when the property is subject to a mortgage that the seller put on it. Start reading at LA Revised Statutes 9:2941. Payments by the buyer must be made to a bank that serves as an escrow agent to make sure the mortgage is paid. The seller must get a written guarantee from the mortgage holder to release the property upon payment by the buyer of a stipulated mortgage release price. There is a penalty for a seller who does not follow the applicable rules: he "shall be fined not more than one thousand dollars, or imprisoned for not more than six months, or both." But I'd be shocked if a DA has ever charged anyone for a violation.
It's a form of owner financing that is used mainly when the buyer has terrible credit and can't get a mortgage loan or when the property has shaky title or maybe repair problems to the point that a mortgage company would not make a loan on it. It's a last resort that most folks do not recommend.
I believe, but am not 100% sure, that if the buyer defaults on the payments, say after several years, the seller can cancel the contract by giving proper notice, and the buyer loses out on any "equity" like he would gain under a traditional mortgage. Pack up, hit the bricks, you get nothing. The seller can also keep any improvements made by the buyer without reimbursement. Perhaps the bond for deed contract could include terms on such issues to protect the buyer, but without them he's probably in a vulnerable spot if he defaults on payments.
Louisiana law has some special provisions for when the property is subject to a mortgage that the seller put on it. Start reading at LA Revised Statutes 9:2941. Payments by the buyer must be made to a bank that serves as an escrow agent to make sure the mortgage is paid. The seller must get a written guarantee from the mortgage holder to release the property upon payment by the buyer of a stipulated mortgage release price. There is a penalty for a seller who does not follow the applicable rules: he "shall be fined not more than one thousand dollars, or imprisoned for not more than six months, or both." But I'd be shocked if a DA has ever charged anyone for a violation.
Posted on 7/3/25 at 6:21 am to tigger4ever
Know someone renting to own right now. They are upsizing houses and one came available They are renting to own it while their house is on the market instead of having two home loans
Posted on 7/3/25 at 6:25 am to tigger4ever
Did anyone ever come out ahead leasing a vehicle and refinancing the balloon payment to ‘own’ the vehicle after the lease was up? It’s essentially the same. Think about that.
Posted on 7/3/25 at 5:45 pm to tigger4ever
Rent to own is not normal.
Owner financing is. You own the home as long as you make the payments. If you don’t they can take the home back just like any other lender.
Owner financing is. You own the home as long as you make the payments. If you don’t they can take the home back just like any other lender.
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