The following
is an email I just received and I feel a lot of people are looking to own a
home this year but “Renting to Own” is not the answer:
“We've been
talking to some folks who operate a "Rent to own" deal. Everything
seems to be legit, and they seem to be pretty transparent. They buy the
house we choose; we give them 3% and pay them what a mortgage + taxes would be
at 6% over 25 years, with an agreement to buy at the end for 3% per year more
than they paid. They refund us what we would have paid towards the
principal and the deposit that we then use towards the down payment. We
pay all house expenses. They make a shit load of money in interest, but its
money that would go to a bank anyways. To me, 6% and 3% per year isn't
unreasonable ………no different than high risk/low money down mortgage. We want to
spend under 200K, and live in the downtown core. They seem to think I'm crazy
and keep sending me listings in Rosedale, the East end or on the Central
Mountain for 225K. Every one of them an ugly box bungalow. They don't
like any listings I send them, either location. What do you think? Rental
prices for houses in the Hammer are pretty high, we'd likely end up spending
$1200/1500 a month anyways. Assuming the contracts are good and everything is
on the up and up, it seems to work for everyone? “
What I think
is really just spitting back what the reader says in his email. “Everything
seems to be legit” is the first red flag.
The facts you give them 3% down when all you need is 5% down to buy a
property yourself then pay all the cost at a rate of 6% instead of a going rate
of 3%. The last line is classic “… it seems to work for everyone?” The person goes on about their credit being
weird and if they rented it would be about the same anyways. I answered him with the simple line
“Bullshit”. That’s it, I called it – bullshit.
If you are able to come up with 3% down then wait to you have saved another
2%. Fix your credit and buy your own
home you want to own and add value to not an “ugly box bungalow”. They pick these properties since they are
around $200,000 and they can make an easy return the 6% and an easy rental,
when no if, you screw up. You will be
paying a 6% mortgage and you will be stuck in the ugly bungalow with the hope
of owning it one day.
Take your
time, fix your credit, save a down payment and then email me when you want to
buy a home your will own the day you move into it. I will find the property you want in the area
that you want with a mortgage you can afford. RENT-SAVE-BUY!
