At least once a month for as long as I’ve been a realtor, I get asked “Do you have any homes that are owner financing or rent to own?” and I find usually that if I ask a few more
Owner financing and rent to own homes in Orlando
Dated: March 19 2021
At least once a month for as long as I’ve been a realtor, I get asked “Do you have any homes that are owner financing or rent to own?” and I find usually that if I ask a few more questions that often the people looking for that, have not exactly understood what that is. So today I’m going to go over what that means and how you can find out if it’s for you, and stick around to the end because I’ll share two programs that may help you out, if you do decide this is right for you.
Welcome back to my channel everyone, my name’s Krista Taurins and I’m a realtor with Fathom Realty in Central Florida and I’ve been selling homes in this area since 2009. I know that some of you watch me regularly and already know all of this but for those of you who don’t If you’re new to the channel please click subscribe and if you’d like to speak to me directly my preferred way to communicate is through a zoom call. I have a calendar in the description below and you can jump on there and set up a time when we can talk. My team and I are getting calls every single day and this is by far the best way to make sure you can reach me and also get my undivided attention.
Now, let’s jump right into it. Let’s first discuss rent to own.
A lot of times when buyers say “rent to own” what they are thinking that means and what it actually means, are two different things. Many times buyers are under the impression that they can rent for a year and that all of that rent money will go toward the purchase price, or their downpayment. That is almost never the case. Generally, you have to keep in mind that the seller also has holding costs while you’re living in the house: Taxes, insurance, HOA. So, while some portion of the rent might be applied to your purchase price, in some cases that’s not how it works. It’s more like a rental home that you have an option to buy at the end of a year. Or in some cases, depending on the type of agreement, you might be agreeing to buy the home at the end of a year. Usually that type of agreement will require some sort of upfront deposit that you would lose if you were to not follow through with the purchase
So when would you want to use this? Well, this sort of scenario is useful if you don’t qualify for a mortgage this year, but you will next year. Perhaps you had a bankruptcy or a foreclosure and those aren’t quite off your credit history yet. You have fallen in love with a home and you want it to be yours, but you can’t buy right away. Or perhaps you don’t have the funds for a downpayment yet, but you will in a year. It’s a way of holding the home for you, while you live in it. Just remember, there are several important elements. Is there a deposit? Will you lose it if you don’t end up buying the home? How much if anything of each payment will be contributed to the purchase price?
Now let’s talk about owner financing. Owner financing, while fairly rare, does happen sometimes. But, many times, again, there are some misconceptions on the buyer’s part. Oftentimes buyers think the owner will simply let them move in with no money down and start making a monthly payment. That is really never the case. And forgive me if all of this sounds silly to you -- I’m just repeating basically the common misconceptions that I hear. Owners will want quite a lot down, I’d say between 20 and 50%. So what’s the advantage to this? Well for owners it allows them to avoid paying capital gains taxes right away. To take a simple example, If they purchased an investment property 15 years ago for $100,000 and are selling it for $400,000 they are going to be taxed on the $300,000 and for some people that may throw them into a higher tax bracket. For buyers it’s a way to get a mortgage that may be somewhat more flexible than using a lender, and will almost always be less expensive than going to a lender, but you will have to have that substantial downpayment.
So that brings me to my last and most widespread scenario and that is rent to own, but with a corporation involved that helps you do it. There are a few programs available in Central Florida where a corporation will buy a home for you, and rent it to you for up to 3 years. You can then opt to purchase it during that period of time, usually after the 1st year of renting is finished and up until the 3rd year.
Some advantages to this program. First of all, the corporation pays cash, so it becomes a cash offer, which is great in this highly competitive market. It would allow you to find your forever home even if you don’t have enough cash saved up for a downpayment to purchase this year. And that seems to be the main client for this type of scenario. Someone who wants to buy, has a good job and credit score, but lacks cash for the downpayment. You could move in, rent for a year or two and then buy it from the corporation when you have your money saved up. It is spelled out up front what your purchase price will be when you do want to buy it. It works great especially if you think that housing prices are going to continue to rise. If you’re just planning on renting a home and you don’t want to buy, this program will substantially expand the amount of homes available to you as you can now look at all the homes that are for sale in addition to the ones that are for rent. It may also provide you with some stability if you are planning to be here for three years or less. In other words, you don’t HAVE to buy the home at the end of the three years.
Disadvantages would be that they do have some rules about which houses you can buy. Some programs say it can’t be within three miles of an airport and most won’t agree to buy older homes, they can’t be in a flood zone, and there are some other limitations. But if what you’re interested in is a standard newer home in a subdivision, this could work out great for you. You do have to apply and be accepted.
So as promised, here are the programs that are working in Central Florida. There may be others, but these are the ones I know about.
The first program is Home Partners of America. It has a very handy website that will tell you exactly what your monthly payment will be on each home that you’re considering. You can also refer to this to see what homes are available through the program.
The second program is called Divvy Homes, and it works in much the same way as Home Partners of America. You apply with Divvy, they tell you if qualify and if so, for how much, you then shop for your home, Divvy buys it and you can rent it for up to three years.
I am registered with both of these programs so if you are interested in doing that and you would like to work with me, give me a shout. If you have any questions about any of these programs I will be happy to do my best to answer them for you. Thank you as always and I’ll see you next time.å
Krista Taurins, PA, of Fathom Realty is a multi-lingual, full-time realtor in Central Florida, known for her creative use of photography, video and high tech marketing tactics in real estate sales. He....
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