No-No on Rent to Own
Dave tells Mike and Danny why rent-to-own housing is not the best thing for them.
QUESTION: Mike and Danny want to know what Dave thinks about rent-to-own housing. They are not ready to buy a home and don’t like giving money to landlords. Is renting-to-own a wise compromise? Dave tells why it helps the seller, not the buyer.
Dave's ANSWER: It is not a wise compromise. Rent-to-own works out for the landlord; it does not work out for the buyer. I would not recommend it.
You say you are not financially ready to purchase a home. When you get financially ready to purchase a home, then purchase a home. Get your debts paid off, get an emergency fund in place, and save up a down payment. That’s hard, but it’s worth it to be able to become a homeowner, and I would suggest you do that.
Buying a home when you are broke or trying to somehow trick the system with some kind of rent-to-own plan does not work. The vast majority of people who do rent-to-own never end up owning. I don’t know an exact statistic, but I will tell you that anecdotally, having been in the real estate business my whole life and done a lot of leases in the old days where we give someone a lease with the option to purchase as a type of rent-to-own, the number of people who have closed on properties to date under those deals is zero.
That’s just from my perspective, and from other people I know that run that kind of deal, I can tell you that it doesn’t work. Nobody does it. My guess is that fewer than 10% actually ever end up owning a home in that situation. Rent-to-own is a bad plan.