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Rent-to-own properties could benefit sellers and buyers

With houses in South Carolina being affordable options for large buyers of real estate, many homes have become part of real estate portfolios for those who then rent them out to people in the area. America's home ownership rate is low, likely the lowest it's been in the last two decades. The problem is that even though homes are affordable, homeowners haven't necessarily been able to get mortgages to take advantage of the low prices.

One thing that could help, according to a news article from April 29, would be rent-to-own properties. Rent-to-own properties are typically rented until an individual is able to obtain a mortgage to buy the property outright. Access to mortgage credit is limited currently, so this can give potential homeowners more time to find the right mortgage while living in a home they love.

Cash buyers tend to purchase the properties that come up for sale in the area, essentially adding the homes to extensive property lists. In the past, these homes could have been flipped for profit, but now, they tend to be rented out for profit over time. If the owner of the home wishes to make back a profit and get rid of the home, selling with a rent-to-own plan can be highly beneficial.

For tenants, the property's low price could be locked in, so they can afford to get a mortgage for the property. The owner gets payments per month, and eventually, he'll also get a payment for the full purchase price of the home. Sometimes, owners allow the rental price to be applied to the purchase, but this isn't always the case. With the lease-to-own and rent-to-own options, the owner is locked into a contract that prevents him from selling the home to someone else; the tenant has the protection of having the right to buy the home as long as he is paying a rent premium and deposit with a fee to make the property a rent-to-own property.

Other kinds of rent-to-own programs may offer rental payments for a period of time, and at the end of that time, the person buying the home must pay off the remainder. If the buyer can't pay it off, it's possible to lose the home and all funds paid in up until that point, just like if he had been renting a property privately.

Source: Center for American Progress, "Lease Purchase Failed Before—Can It Work Now?," Sarah Edelman, Michela Zonta, Julia Gordon, April. 29, 2015

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