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…. now, back to today’s post:
Jim wants to know if he can turn his current rental into a Rent To Buy:
I have moved from a (rented) flat costing me ~33% of my (net) monthly income to a small house costing 25% (net). (Of course, being a First Time Buyer, I’ll be breaking the 20% net worth rule to put down a deposit, especially given the level of deposit required to get a decent rate here in the UK).
The current owner seems enthusiastic about the option of selling it to me at some point, but I’d like to ask advice on what sort of ‘offer’ to make. i.e. what sort of contributions my rent payments would be / discount off the market value.
I’m thinking if we both have a valuation done, I offer 15% off the average of the two?
I’m not sure that the Rent-2-Buy works in Jim’s case, because he’s already in the house and paying the rent!
But, let’s assume that Jim is willing to sign a longer lease, it will then depend upon whether he is able to bypass the agent or not.
You see, for a rent-to-buy to work, basically you are trying to say to the owner:
Rent to me for longer, then I will:
1. Save you the agent’s fees and commissions, because I will be staying in the house and will keep it as my own (“so, you don’t need an agent to manage me”)
2. Save the 2 to 4 week’s typical vacancy each year as the typical shorter-term tenants move on (you will need to find out what’s common in your area AND what the owner’s experience has been).
Then wouldn’t it be reasonable to split those ‘savings’ with the current owner (by way of a ‘credit’ towards a future purchase of the house)?
BTW: Jim, it’s OK to break the 20% equity rule on your first home, because it helps to get you into a house:
Rent to buy? I would think you could do all kinds of creatative deals on paper until you both find one you like. Example commit to a sales price in today’s market which is low and sign a long term lease 3-5 years to save your down payment. Get a break on the rent with the long term lease, lock in the market price today, by commit to a purchase date.