rent to own

[yenajisjaney]

hi just wondering if anyone can give me an insight about rent to own houses? as i have a friend thats seems fascinated about this. many thanks:biggrin:

[ShouldIStayOrShouldIGo]

Are you talking about vendor finance or something different?

 

For the seller, the reasons why Vendor Finance is popular are –

• the seller receives a fair sale price because they are providing vendor finance
  
• the seller can qualify the buyer themselves and allow them to move in quickly
  
• the seller can set the income to be received from the buyer so as to exceed the mortgage payments the seller must make to their financier, until the buyer is ready to ‘cash out the contract
  
• the seller passes on the obligation to pay for maintenance and repairs to the buyer from the date the buyer moves in
  
• the seller continues to receive rates notices and insurance premiums assessments (because the title to the property remains in the seller’s name) but is reimbursed for outgoings, such as council rates, water rates and insurance premiums by the buyer from the date the buyer moves in
  
• the seller is no longer liable to pay land tax (in some States) – neither is the buyer liable because of the owner-occupier exemption
  
• the seller retains the title to the property in their own name – the buyer has an equitable interest until they ‘cash out the contract’ – only when the buyer pays out the price, is the title to the property transferred into the buyer’s name.
  
• the seller can continue to depreciate the property and obtain tax benefits until the buyer ‘cashes out the contract’ and the title to the property is transferred into the buyer’s name.
  

For the buyer, the reasons why Vendor Finance is popular are –

• the seller is able to set vendor finance payment terms to suit the buyer, rather than the buyer needing to fit into the straightjacket of a standard home loan offered by the banks – for example, the seller can offer low payments to start, permitting extra payments to be made
  
• the payments are structured like a bank loan – as principal and interest repayments usually over 30 years
  
• the buyer can move in immediately the seller’s background checks are completed
  
• the buyer has the freedom to improve the home and keep the increase in value, because the purchase price is fixed up front and never changes
  
• the buyer can refinance or sell the property at any time, and pocket the profit
  

For the seller/owner, the reasons why Rent to Own is popular are –

• the seller/owner receives a fair sale price because they are providing vendor finance
  
• the seller/owner can qualify the tenant/buyer themselves and allow them to move in quickly
  
• the seller/owner can set the income to be received from the tenant/buyer so as to cover the mortgage payments the seller/owner must make to their financier, for the duration of the Rent to Own arrangement
  
• the seller/owner cannot pass on to the tenant/buyer the obligation to pay for maintenance and repairs, but can encourage the tenant/buyer to renovate the home by offering a sweat equity credit
  
• the seller/owner continues to receive rates and premiums assessments (because the title to the property remains in the seller/owner’s name) but can set the rent at full market rent, rather than a reduced rent, and by this means ‘cover’ these outgoings
  
• the seller/owner remains liable to pay land tax – there are no exemptions
  
• the seller/owner retains the title to the property in their own name – the tenant/buyer has an equitable interest because of the option to purchase
  
• the seller/owner can continue to depreciate the property and obtain tax benefits
  

For the tenant/buyer, the reasons why Rent to Own is popular are –

• the seller/owner is able to set the payments terms to suit the purchaser – for example, the seller/owner can agreed to accept a larger up front payment and lower ongoing payments
  
• the payments are fixed for the duration of the Rent to Own arrangement – so that the tenant/buyer can budget for a long period
  
• the tenant/buyer can move in immediately the seller/owner’s background checks are completed
  
• the tenant/buyer has the freedom to improve the home and keep the increase in value, because the purchase price is fixed up front and never changes
  
• the purchaser can finance or sell the property at any time, and pocket the profit
  

http://www.ownyourhome.com.au/

Edited August 15, 2012 by ShouldIStayOrShouldIGo

[yenajisjaney]

thanks for the info