It's challenging to buy a home in Austin. Many mortgage lenders will not consider a prospective homebuyer who makes less than $90,000 to $100,000 annually.
Rent-to-own homes offer an alternative to make purchasing a dream home more affordable. This model can also work for picky homebuyers who want to live in a property before securing the title.
For many Austinites, finding the right home feels out of reach. Knowing there are other options may be just what owners and investors need to make the sale. Learn more about the rent-to-own purchasing model and what it could mean for you next.
What Does Rent-to-Own Mean?
Rent-to-own means a tenant can buy the home they are renting on or before the date the lease agreement ends. Sometimes, the owner or investor may subtract a percentage of their rental payments from the home's purchase price.
What's the Difference Between a Mortgage and Rent-to-Own?
The difference between a mortgage and a rent-to-own agreement comes down to who owns the title and lives in the home. With a mortgage, the person who lives in the home holds the title and pays the mortgage lender.
Rent-to-own properties are different. The person who owns the title does not live in the home, although they still make payments to the mortgage lender. However, the tenant who lives in the home reimburses the title owner via monthly rental payments.
Many rent-to-own tenants will pay more than the amount the title owner pays for the home. This extra amount may be applied to the purchase of the home at the end of the lease period.
How Does Rent-to-Own Work?
Rent-to-own works by locking in the home purchase price at the beginning of the lease period. Beyond that, it works differently based on the contract type. There are two types of rent-to-own contracts: lease-option and lease-purchase.
Lease-option contracts give tenants more flexibility because they are not legally required to purchase the home at the end of their lease. With lease-purchase contracts, the tenant must purchase the property.
The typical rent-to-own leasing contract covers a period of one to three years. That means the tenant will pay rent on the home during that time, after which they either must or have the option to buy the property.
Rent-to-Own Benefits
The rent-to-own model has many benefits over traditional homeownership. Renters can:
- Save up for a down payment
- Build or improve their credit
- Live in the home before buying
Prospective rent-to-own tenants must carefully weigh these benefits against potential drawbacks. For example, if they choose not to buy the home, they must forfeit any additional money they paid in monthly rent.
We'll Manage Your Rent-to-Own Homes in Austin
Rent-to-own homes offer an alternative path to ownership for homebuyers. This model allows prospective buyers to live in and make payments toward their dream home before purchasing the property.
Need help managing your rent-to-own portfolio? PMI Austin has nearly 20 years of experience managing properties like yours. Contact PMI Austin today to learn more about our Austin rent-to-own services.
