Flexibility is Trending

July 21, 2019 by Marty Orefice |

It makes sense to explore an area before settling down

Renting to own is a trial commitment with a long-term goal of purchasing a home. It’s a trial because, after the lease term, you can choose to walk away from the home without purchasing it – all you lose is the option-fee. However, option fees, which are 2-5 percent of the value of a home, are still substantial.

You should treat rent to own with the same level of commitment that you would treat buying a home. Though, love that it’s not a hardened commitment. The buyer maintains the flexibility to leave if the city/neighborhood isn’t the right fit or if greener pastures call.

Renting is Popular

According to today’s trending topics on LinkedIn, the desire for mobility is growing in popularity among empty-nesters and millennials. That means that these populations want the flexibility to move away from an area after trying it out. They don’t want to tie themselves down.

Due to that trend, CNBC’s article, “This is the fastest growing trend’ in the housing industry, and investors are rushing in
,” claims that 43,000 homes were built specifically for renting last year – the largest amount in the over 40 years! Developers are betting on earning more money from building homes for rent than they would from selling the homes outright.

So, Why Rent to Own Instead of Renting?

The article claims that developers are earning more money from holding a rental home for 7 – 10 years than they were from selling it outright. They’re renting these homes for $1,800 to $2,300 per month. Meaning, they earn between $151,200 (at $1,800 a month for seven years) and $276,000 (at $2,300 per month for 10 years) per home they build.

The median cost of a home is $200,000, according to a different CNBC article. Even at $1,800 a month, you’ll pay more than $200,000 within 10 years of renting a home – exactly $216,000.

That doesn’t mean that you could have paid off a home with a decade’s worth of the same payment – given the interest rates on mortgages. BUT, after 10 years, you will have built up equity in a home. Whereas, when you rent a home for a decade, you walk away from it with nothing to show for it.

While this trend claims the empty nesters are saying “been there, done that” to homeownership, Millennials, who question whether to settle down, should consider renting to own a home. It makes sense to exercise caution. You don’t want to go all-in on an investment and, then, change your mind before it pays off. Rent to own is exactly that.

The process makes it easier for millennials to become accustomed to an area and develop roots. Then, if they like the home and the area, they will have a head start on homeownership and financial stability.

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Marty Orefice

About The Author

Marty Orefice

Martin Orefice is a real estate investor who has been in the industry for over a decade. He has experience with rent to own deals from all sides—as a buyer, seller and investor. He created RentToOwnLabs.com to provide the #1 resource where people can find information about all things rent to own.

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