Arizona rent to own buyer advantages can come into play when the housing market is soft and when the housing market values are moving steadily, in an upward trend. When the housing market softens, sellers start entertaining other types of contracts such as property lease contracts and lease purchase contracts.
Additionally, the Phoenix Arizona rental home market has been as challenging for tenants as we have ever seen. With rental home inventory remaining at extremely low levels, rental home pricing has remained at very high levels and should continue to do so until we see more multi family apartment rental units come online. In most cases, it is less costly for a tenant to enter a home purchase than it is for that same tenant to enter into a rental home lease. But what if a tenant doesn’t quite have his or her credit and/or finances in order and needs more time to improve credit scores? The lease purchase option or rent to own property could be a very good solution.
Arizona lease purchase and Arizona rent to own contracts can be relatively simple to enter, inexpensive for the buyer to engage and as a result, they can be much less stressful.
Arizona rent to own and lease purchases typically work like this: The tenant and the owner create a lease contract on a subject property. The property lease is then combined with an option to purchase the property within a predetermined time period (usually 12 to 36 months) at a predetermined price. The tenant pays a non-refundable “option fee” (similar to a purchase down payment) which can be between 2% and 20% of the price, depending on how low the tenant would like his or her monthly lease payments. This option fee will be applied to the purchase price of the property. The tenant will pay the monthly lease payments up until the purchase option is exercised.
Arizona Rent To Own Buyer Advantages
There are many benefits of home ownership, some tangible and some intangible. The more tangible benefits include annual tax deductions and the ability to add home upgrades that will eventually belong to you once the property is purchased. Intangible benefits might include added security, knowing you don’t have to move again once the lease term has expired and of course, it is hard to put a value on being able to live like an owner while being a tenant.
If you don’t have the ability to put a down payment on a home just yet, but you know you would like to buy within the next few years, contracting on an Arizona rent to own home is an excellent option. Another huge benefit is the rate at which you’ll accumulate equity.
- Equity growth: All or most of the tenant’s lease payments are applied toward the principle which means when the tenant exercises the option, he or she will have less principle to pay. Option fee or down payment is credited to the price of the home; the tenant pays the seller this option fee or down payment as noted above. This down payment will be fully credited towards your purchase when you buy the home.
- Optional seller financing: Banks have much tighter lending policy and in some cases,
sellers may carry the financing of the purchase. Regardless, it is often much easier to obtain financing for a home when you’re able to show a long history of on-time payments.
- Control of the property: As the buyer, you’ll have a very good opportunity to understand the ins and outs of the home, and what additional work you would want or need to do such as home improvements, etc. before purchasing the home.
- No taxes, association dues. Reduced liability: Because the buyer doesn’t yet own the property, he or she does not have to pay association dues or property taxes. So as the buyer,you’ll have ample time to prepare for the cost of the home before purchasing the home.
Contact our professional team of Phoenix Arizona realtors today to find out if an Arizona rent to own contract is right for you.