i want to rent to own a house from my friend, what are some of the precautions i should look into?
do i need to get a lawyer?
what are the advantages?
what are the disadvantages?
is it worth it even if the house needs some work?
the power source is one of the older breaker boxes will this pose as a problem to get power turned on?
the house is for $25K and about an acre of land, it doesnt need any immediate repairs besides a few patches to some pin holes in the metal roof, the payments would be $300/month. is this considered a good investment?
- 1 decade agoBest Answer
Lawyer....Yes. Needed to draw up a binding contract and can also check records to see if there are any liens against the property.
But you won`t need this until you`re actually Buying and not renting.
Getting to find out All the goods and bads about the house and a longer time to make up your mind whether you *Really* want the house or not.
Having a house of your own when you are actually buying it.
.......how long are you going to rent before the rent becomes payments?
Do the payments go up when they become "payments"?
Disadvantages: a. Unless you get a home inspection, and a termite inspection, you may have a major Money Pit.
But again, you should be able to find out all these things while "renting".
b. Renting/buying from friends and/or family is Usually not a good idea. There`s alway hard feelings.
Worth it? Sounds like it not knowing where you live but check with a real estate agent as to cost per square foot and acreage in the area where the house is.
The older breaker box should`nt be a problem but if the electric company red tags it they are relatively inexpensive and again, depending on where you live, a homeowner can be their own contractor and do almost any renovating themselves. Esp outside the city as this sounds like it is.
$300 a good payment? What do YOU think after finding out the above?
BTW, DON`t let the "Gloom and Doomers" jumping on this question talk you out of it, if you want the house.......Go For It!
The contract will NOT be much different than getting a mortgage by conventional means.
Yes. You`ll be responsible for the upkeep on the house....if anything breaks You fix it....just like my wife and I do with an FHA mortgage. No different.
If we default WE do`nt get anything back either.
What I *Would* do `tho, is make your friend pay for anything that needs to be fixed (breaker box?) until the rent becomes payments.
Then you bought the house just like anybody Else does.
As far as losing all the money you paid in if you change your minds. You`re throwing your money away on rent somewhere anyway are`nt you?
Just don`t lose your head and spend a lot of money on the fixing up `til you`re buying it.
Good luck!Source(s): Carrying the papers on a rent-to-own house now. They`ve been there 8 years now. Tried the same deal with a cousin before these people. BAD idea.
- Anonymous1 decade ago
I think getting just about any home at that price with land would be a good deal these days. Just make sure to use a contract that is legal and binding in your state. Hopefully you can find a lease to purchase contract at Office Max, Office Depot or Stevens Ness for this. Make sure that if it needs to be notarized you get that done. Having a title search done and seeing the deed to make sure your friend really owns it would be a good idea. If you can afford to have an attorney draw up the papers that would be even better. You should not have a problem getting the power turned on with the breakers, the power company does not need to have access to the inside of the house to turn on the power. Do make sure everything is shut off when the power comes on to reduce any fire hazard. Especially heaters, stoves, etc. Make sure the hot water heater is not turned on unless it is full of water. Doing so when empty would burn out the element.
As to the payment schedule, you did not define the rent-to-own terms, so I can't say if the terms are a good deal. I would look at what apparent "interest" rate is. A question would be "what makes this a rent-to-own deal as opposed to "buying the house on a contract"? Perhaps it is the same thing, depending on the terms. (A "repossession" would be different than and "eviction") Keep in mind that landlord/tenant laws may apply to a "rental" but not to a contract purchase and that could be in your favor or not. That would be worth looking into. I don't know about that.
Some attorneys will give you a quick free advice call on the phone hoping to get your business. Check on the internet for a referral service that offers this perk.
- Anonymous1 decade ago
All "Rent To Own" Contracts are in favor of the Seller not the buyer.
1. You pay rent to pay down the price
... ..a. Seller attaches a % of interest to unpaid balance - just like a loan ( there are limits though on this).
2. You pay for all repairs and can do as much as you want at your own cost.
.. .. a. Value of property increases and selling price can be adjusted unless a written contract exist prohibiting this activity.
3. You pay propery taxes, insurance, etc ( just as if you owned it).
.. . a. Seller's has no other expences associated with the property
4. If buyer changes their mind they are entitled to " Zero" back as a refund for repairs / remoldling.
. . . a. Seller can turn around and still rent to you or anyone as a regular tenant, or enter a new Options contract with another buyer.
As you can see, the seller is writing a loan to you in so many words because you agree on a price and a monthly rate. They can legally charge interest at a specified rate throughout the life of this note.
You are responsible for the upkeep, repairs, and all cost associated with the property but will get refunded nothing if you change your mind.
Meanwhile, the seller is getting a higher price and monthly rate than they would otherwise because most people who enter an options cannot qualify for a mortgage - and the seller knows this. Also, the property is probably not worth a lot or would produce a lot less if sold under the standard mortagage method - so this is probably why this seller is choosing to sell as an options. Take note though, often tricky sellers will make you think it was not their idea that it was your idea to do it this way, but once you see the contract you can tell they thought long and hard about this -- this was not a coincidence it was intended to be sold as an options contract long ago.
If they want, around here anyhow, they can charge you a deposit upfront or extend the time so you can pay in a deposit - this is also lost money if the contract is not fullfilled.
Furthermore, there are some that charge a buy-out to release you from the contract.
personally, do not enter into an options contract; especially, with a friend or a relative. " I wouldn't do that to you, you are my friend" will be words you will hear often, but they will be doing it to you even as they speak.
If you are determined to enter into this contract remember one thng, it is just like buying a home. Just because they wrote up a contract that has the terms listed does not mean you have to accept it. You can negotiate on the terms of the contract just the same. You may be able to agree on lower interest, modified responsibility, modified deposit and buyout terms.
However, you do not want the interst to accumulate until the end of the contract. Because month one comes you make a payment and it is deducted from the balance. Interest is applied to the new balance and that amount is not due until the end of the contract.
Next month comes along, you make a payment and it is deducted from the balance.
Interest is applied to the new balance and the interest is not due until the end of the contract.
you see, each month the interest is applied and tossed to the end, but creating a new balance which next month's interest is compounded on top of this. So interst is compounding throughout the life of the contract if the interst is not due until the end of the contract.
If it is charged at the rate of 4% for four years try to negotiate to have the interest rate pushed to the end and not the interest amount. Why, well rather than pay 4% each year it is cheaper for you to pay 16% the last year when the balance will be much less than what it will be year one or year two.
Not all sellers look at this fact and think it is the same thing.
Most often though they are not going to allow all of it pushed to the end, you might get a deal where 1% charged year one, 2% charged year two, 3% charged year 3 and the balance the final year. which it will still be cheaper to pay 10% interest on year four, than it will be to pay interest of 4% throughout the years. Hell year one will only be 1% added when the loan is at its highest.
You need to be creative here, don't just accept what it put in front of you and agree to it without negotiating on the terms ...and price.
If you do this though, above all else have a lawyer....don't go into this unarmed.
I would like to hear how you make out on this if you go forward with it. Email me and let me know how well you did on the contract oK?
$300 a month but for how long?
You need to look not so much at the monthly price but the final selling price and Interest_rate.
Heck, at 300 a month it will take about 6 1/2 years but there is no profit beyond the selling price. So what if they wish to sell it to you at $300 a month for 20 years - knowing most mortagages are 30 year notes, or even cut your price in half to make it enticing to you 150.00 for 20 years. Don't sound too bad, but it would bring them 36000 not to mention in interst if not worked properly you could end up paying another 36000 over that course of time.
Keep in mind, the monthly rate is meaningless until you know " How Long?"
- How do you think about the answers? You can sign in to vote the answer.
- sensible_manLv 71 decade ago
Renting to own a house is called land contract. It has the same rules as plain buying a house. Get a contract drawn up and know exactly what is included in it. Have it signed and notarized. getting a lawyer to do this would be advised. Friends and money/property do not mix. Make it legal and binding on BOTH sides.
- youngerLv 43 years ago
large investment particular get a criminal expert reward no economic business enterprise, credit verify, and so on.. hazards, dropping the friendship if it falls by way of, while you're previous due, and so on... the skill is distinctive everywhere, i could easily try it first. no rely if this is critical you to renowned if the value is nicely worth it, get it appraised, which will help you exceptionally, yet once you would be renting besides, why no longer positioned some fairness into it make certain you handle matters like: Who gets the homestead in case you die? Who gets the homestead if he dies (can his heirs sale it and chop up the income) Do you have the alternative of economic business enterprise financing or early payoff? are you able to're making extra beneficial money to pay it off early? in case you are able to no longer make a fee, what are the repurcussions? i think of there are standard kinds for all this. In essence you're doing a on the industry via proprietor with proprietor financing.
- 1 decade ago
Not sure where you live, and what exactly real eastate is like, but the first and maybe only question you need to ask is, "Do I really care about my friendship?" If answer is yes, I would advise against renting from friend!
- canivieuLv 51 decade ago
Not a good idea. that is how you lose friends.