Buying a Los Angeles Rent-to-Own Property
Owning a home in Los Angeles is wonderful, but it’s not cheap. Blame it on supply and demand; Los Angeles real estate prices are some of the highest in the country. The current median home price in the area is just over $400,000, for a small property that may only offer two bedrooms. In some other parts of the country, you could get a home four or five times that size, with several acres of land included.
But we all know LA is a great place to live, work and play, even if buying a home is a challenge. Even FHA loans require 3.5% of the home’s price as a down payment, a whopping $14,000 for a $400,000 home. For many people, that is an unreachable or unrealistic goal, especially when you’re throwing away your money in an apartment.
Luckily, there is another way to buy a home. Renting to own allows individuals and families to move into a home without a large down payment. Here’s how it works:
Rent to own homes can be found advertised online, in newspapers, or on street signs. In the typical agreement, the potential buyer will pay a non-refundable “option fee” to rent the home. This option fee will be applied towards the purchase price of the home. Rent is set just above the traditional rental value of the property, with the extra money going into an account to be put towards the down payment for the buyer. This is also non-refundable. At any time during the lease term, which usually spans 12-26 months, the renters can buy the property, using the money saved from their monthly rent and initial deposit as part of their down payment.
For people who have a poor credit history, or who want to move into a home, without needing the initial large down payment, renting to own can be a great option. Also, unlike traditional home sales, the buyer gets to try out the home before buying it. If there are any major problems with the home, or if it just isn’t a good fit, the buyer can back out, and only be out their initial deposit and previously paid rent.
Just as with any renting situation, it is important to carefully read over and sign a lease agreement before entering into a rent to own arrangement. Sitting down with the current owner and an impartial attorney is one of the best ways to write up an agreement that works for everyone. This will protect you in the case that the seller is not as upfront or honest as they could be.
Although it is not required, working with a real estate agent is often a good idea when you are considering a rent to own property. Finding a qualified realtor, one with positive client testimonies, can save you a lot of stress and worry. Right now, while home prices are still low, is the perfect time to lock in a price for a rent to own property.