Is Rent To Own Legal
Hey, Shana, it’s my rent to own legal in Texas because it seems like a good idea, right? Like it seems like the step like I’m renting a place and then I want to own a place, and it seems like a step in between.
Yeah. Ok, so let’s discuss it from a real estate perspective.
So there was a period of time where there were some lease purchase contracts that became illegal. Ok. However, there are always workarounds to do this, so it is legal for a person to do this, and we do not have the contract to do it. So typically how it works.
I mean, I don’t know. I kind of look at it from both sides, and I don’t think it’s really a feasible option. But typically how it would work, we’ll walk through a scenario where say, I wanted to rent this home and then purchase it at the end, so I would rent it from you for a period, I don’t know, one to three years.
And I would give you nonrefundable option fee, typically one to five percent.
So I’ll give you the one to five percent option fee to rent at a higher price than what the market. Price would be. And then in one to three years, then I would purchase that from you.
So we would lock in a price. I would know what I’m paying for it. And if I’m not ready, and that’s all fine, right? So I give you all this. So here are the potential pitfalls that I see. What if in one to three years, you’re not ready?
Well, you’ve just paid this landlord a lot of money to not be ready. Right, so there’s a lot of risk there. What if you can’t pay your mortgage and you foreclose? I’ve paid you a lot of money, didn’t go to the home and it’s.
I’m so and what if prices go up dramatically, right? What if prices go down dramatically? So in every one of those scenarios, what happens is one party is harmed dramatically. And you know, when you have things like that, that’s going to always cause a problem.
So we try to avoid those problems and try to find the best solution for everybody right now because just scheduling a problem is not good.
No, it’s not. And I think that, you know, the way we have always done this, we’re in a different market now. But how we’ve looked at that in the past is we do a lease with the option to purchase at the end. And then you come up with the terms and agreement then, but you don’t want to lock too many things in.
Um, because you would come up with
Market price at that time, so what you’re really trying to accomplish is you can afford a lease now. Right? And you would like to purchase property later, and the other person says, No, I’ll sell it to you when you’re ready and you can do that.
So what’s really getting set up is you lease it now. You have terms that are market condition terms today for the lease, so you have a valid lease. Then at the end you have the first, you have an option to purchase it. Yeah, and it’s kind of pretty simple, yeah.
Now it may be higher, but or it could be lower.
It’s whatever the market is at that point.
I mean, it has to really fall into a really perfect. Situation for for this to really. Be advantageous. It does.
I think so, probably pretty much avoid it, but the way you work around it is just what you said with a lease and an option.
What if they don’t like that home or first right to refusal three years?
Yeah, there’s a lot of things that change. A lot of things change. So I think it’s risky. I think if you really had a seller and a tenant that wanted to do something like this, then they need to get an attorney and work it that way because we don’t have a contract.
We are we. We do not need to be practicing in this. This way. This really crosses the line.
And I think you’re really scheduling a problem, and I think somebody can be harmed. And it’s this is just not the market for that.
And yeah, not going to work because otherwise there’s better ways.
There certainly is. Ok, so that’s rent to own and lease purchase kind of all together there. They’re essentially the same.
This is the name of this company. There was a company that actually would work with you and go and purchase the home for you and then you lease from them, and they had a contract that actually resulted in a sale. But there’s a specific company.
There’s a lot of legal legalities to it. So they had that worked out, that may not be that. You know, that risky, I don’t know, it’s still risky to me as a buyer. I’m saying you’re going to be paying a lot more, so take that money and just save it yourself.
Invest it like just be in charge of your own destiny. Don’t lock yourself into a contract where you’re scheduling a problem. I would avoid the other company to. I know which one you’re talking about. I’ve kind of studied it and I’ve looked into it.
I know I heard him on the radio, so I looked it up and then I looked into how it’s kind of going and I’m like, Yeah, it’s going to be a problem.
So. Ok, but you know, for you guys, if you do have somebody that’s looking to do that, then maybe you could reach out to home partners and connect them and get a referral fee or something. I don’t know.
Yeah, but just, you know, just, you know, I already looked into it and I don’t think it’s a viable thing. And I think that it’s a challenge for other reasons. Yeah, yeah. But you don’t want to touch that with a ten foot pole.