So you have bad credit? Or no credit but you want to get into your own home? Rent To Own or Lease Purchase Homes can be the ticket to getting that second chance to live the American Dream. But don't get so wrapped up in the dream you don't see the reality.
I had bought ten houses in less than six months and knew I was on to something. I lease purchased the homes to the tenants and found a win-win for all three parties.
Then I began to hear of the scams which were going on through the investor world. Unknown tenants were renting homes from investors but they were making some big mistakes. Let's look at the top 4 that are made every day and how you can avoid doing the same.
Mistake #1
**Rent Amount**
One of the top mistakes made is when the tenant gets into a home because they can afford the payment or rent every month. And they never take the time to figure out- can I afford the payment when I get ready to buy the house.
Don't get so locked on the easy payment and forget your goal. You want to own this home one day. Go to one of the free calculators online. A great one is at Bankrate.com. Figure out the payment by calculating the price and the interest rate. Now ask yourself, can I afford to buy this house one day or am I just kidding myself and just renting.
Mistake #2
**Price**
Are you overpaying just because you want your own home? Don't be fooled and blind to the thought that you may be overpaying for a home just because you want your own home? Take the time to research the neighborhood. Pull flyers for houses that are for sale. Does it come close to your price? Call a real estate agent up. Ask what the houses in this neighborhood selling for. Don't pay too much in a year for the luxury of living in your own home today. You'll regret it.
Mistake #3
**Maintenance**
So now you are an owner-in-training? You are taking care of the maintenance. But when is it too much? What does your contract read? How much maintenance are you liable for? If the roof goes out, do you have to come up with the $5000?
That being said, it is true that many investors rent to own or lease purchase because they don't want to be landlords. Midnight calls to unclog toilets. No thank you. Bottom line- Make sure your contract has a limit to the maintenance that you are liable for.
Mistake #4
Let's call it ** term **.
Let's define it:
The length of time that you can buy the house that you are renting or leasing.
What is the mistake and why does it matter?
There are investors/landlords who will place you in a home and know that in a year's time there is no way for you to be able to get the loan.
You see, many times one year is not going to be enough time to *cure** or **repair** your credit.
It's just not enough time.
Don't get into a position that you won't be able to buy the house. You will lose your option money.
You have a contract that ends in one year. You can now do nothing but move.
The landlord can ask you to leave and you have to leave. The house is then rented again for a higher rent and higher purchase price and you're looking for the next home.
How to avoid this:
Before getting into a contract on the home, get with a mortgage broker in your town. You can find one in the paper who will be advertising to help people with bad credit.
Let him/her run your credit and make sure you tell them that you want their honest opinion. Can you get a loan in a year's time and what do you need to do for that to happen. What will be the rate that you are looking at?
Don't let them just tell you what they think you want to hear. "Give it to me straight, Doc."
Let them help you with a game plan on how to improve your credit for the future.
Let's sum up the mistakes:
Avoid the mistakes dealing with price, rent amount, maintenance, and the term of the contract. I hope you've learned something. I know now that you'll go into your next house with more info.
Trey Patrick is an investor and landlord in Athens, GA. He is also the author of an ebook showing the general public how to buy their own rent to own home with very little money and no credit check. http://www.buyhomewithnocreditcheck.com