Rent to Own real estate can end up being a successful device and like every device it could end up being used for wonderful things such as empowering those with a low credit score to turn into owners, however it can also be used for very awful things like allowing speculators to set young families up for failure and eventual delinquency.
Over our border the united states Rent to own has been utilized for many years and is a highly popular. However here in Canada, it is just now getting into the mainstream and sadly this particular shortage of practical knowledge is causing a lot of households to get into trouble. In truth I would liken exactly what is occurring to the sub-prime turmoil which occurred in America back in '08, albeit on a smaller range.
There are actually only 2 business styles for Rent to Own companies to adhere to, the very first of which is the investor/owner. This is somebody who has read a guide or perhaps went to a seminar taught by some "guru" and after this has gone out to the marketplace and purchased a home to trade via rent to own. The next business model is the Rent to Own Agency, this is a business that functions by simply having mortgage brokers refer their potential customers who have been rejected for a financial loan, matches these customers with a property and then sells the deal and the home to an individual purchaser.
What's completely wrong with these you may well ask? Well let's examine the investor/owner model. These people go out into the marketplace and buy a property, usually not the ideal house but the least expensive, then they either invest some money into renovations or just try and sell it as it is. But they don't offer it for what they acquired it for or what the updates cost; these people mark it up by $20,000 or more. The property then sits on the market month after month and eventual someone turns up that will go ahead and take house.
However by this point the investor/owner has already made 4 or 5 mortgage payments and is desperate to take someone, any person really who'll stroke a cheque and go ahead and take home off their hands. Now there is absolutely nothing wrong with this particular situation, however fast forward two or three yrs once the customer is finally prepared to buy the property.
The client goes to the lending company and is quickly informed that the house they are buying isn't really worth what they are paying and so they can not get the house loan or even worse that the paperwork was carried out improperly and the Canadian Mortgage and Housing Corporation (CMHC) will not insure their home loan. The client now goes back to the owner/investor for help but they are instructed i'm sorry however , if you can't purchase the residence by the particular date described inside their agreement then they are out of luck.
While owner/investors can easily do Rent to Own ethically and within the law, you should be certain that you're doing business with someone that has learned what they are doing and didn't merely go into this business after seeing a workshop.
Now let's have a look at the Rent to Own Business, these organizations are generally safer to deal with as they quite simply have generally been around for a few years and understand just what they're doing. The best part about dealing with an agency is that they usually allow you to choose the home. This means they will qualify their customers and then send them out looking in a cost range they will pay for, the properties are also normally not necessarily marked up immediately.
On the other hand you do need to be mindful that nearly almost all firms market their deals to some third party, this means the grinning, willing to please person you might be dealing with at the agency, won't be the same man or women you contend with if you find a problem with the property.
I started out as an owner/investor in Rent to Own properties, several years ago and finally opened an agency called Fair Home Buyers after the demand exceeded my ability to supply by myself. What makes us different is we preserve an possession within the deal and only partner with investors to provide the loans.
This implies you at all times work with us, you're able to pick the house you desire to Rent to Own and also your never marketed off to some new person you've never worked with before. Right now we only do Hamilton Ontario Rent to Own deals simply because the Hamilton housing market provides affordable housing that consistently appreciates making it a reliable investment both for my company, and our clients.
Author Resource:
For anyone who is interested in the Hamilton Ontario Real Estate market, or would easily want to know more about Rent to Own in general. You can check out www.fairhomebuyers.ca and check out our brief video describing exactly how Rent to Own may get you started off upon the path to home ownership.
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