Rent to Own Homes is now available in Colorado Springs
A Little of History:
Rent (or lease) with the Option to Buy or Rent to Own was never common in the Colorado Springs market. Not only there for all over the United States, however the interested in renting has become a lot more interesting to those who are want to look into it. The process itself is becoming a little stricter such as a tenant background check, insurance other items that landlords might look into when looking for a potential tenant. Not to mention those who are just looking at buying to rent their properties out to others. While there have always been buyers that would like to do this, there were very few sellers who could afford to provide this option. Those looking to rent would need a good credit score too, which makes it even harder to find somewhere suitable. It can be difficult to build a credit score when you’re not sure how to establish credit in the first place but without good credit, the chances of being able to rent are slim. Many sellers required a large non-refundable deposit to reduce their risk, which also made it difficult for the Renter/Buyer. So for Buyers, it was literally a needle in a haystack to find a home with a seller willing to rent, with the option to buy, sometime in the future – Until Now!
New Rent to Own Option:
Our office has recently partnered with an Investor Group that is willing to purchase a home for cash and rent it to a family that plans to purchase the home from the Investor within five years. Sounds too good to be true, but the Investor has a great track record in over three-dozen cities across the United States.
Yes, there are minimum requirements, but they are less restrictive than a traditional lender, which will allow the Renter/Buyer time to improve their financial position, qualify for a traditional mortgage in the future, and purchase the home they are renting. Not all homes in your area will have the rent to own option, as some may just be available to rent and others may ask you to pay an ongoing fee for your mortgage. If you are really set on owning your own property one day, but have yet to find one that you like with this option, it may be in your best interest to have a look for any rental properties in your area until you find one that you would like to settle down in permanently. In the meantime, why don’t you see how the rent to own option works.
How it works:
First, to make it easier to understand, it is best to describe some terms.
Investor – This is the investment company that will purchase the home, act as a landlord during the rental period, and then becomes the seller to the Renter/Buyer.
Client – This is the family or person that wants to rent with the option to buy in the future (Renter/Buyer).
Agent – The licensed Real Estate Agent helping the Client find a qualified home, then assisting them with making application with the Investor. Represents the Investor in the purchase of the home.
Like any business, it is necessary to lay some ground rules to limit the risk to the Investor.
Basic Client Requirements:
– Annual household income of at least $50,000
– Stable employment
– Credit score of 525 or higher
– No history of eviction and no pending bankruptcy
– Acceptable criminal history
Every Household Must Provide:
– Full application from everyone 18+ years old living in the home
– Application Fee ($75 total per household)
– Supporting documents:
— Income Verification
— Asset Verification (equal to 2 months of rent – which becomes a security deposit and is applied toward the purchase of the home)
— In an approved community (schools ranked in the top 50%)
— Not adjacent to features that may negatively impact the value (railroad tracks, highway, etc.)
– List Price
— Between $100,000 and $550,000
— Minimum of 2 bedrooms
— Lot size of 3 acres or less
– Property Type
— Single family home or fee-simple townhome
— No condo associations, commercial, or multi-family properties
– Sale Type
— Traditional sale or bank-owned properties
— No short sales or auctions
– Safety Considerations
— No material deficiencies (e.g., major structural issues, pervasive mold, etc.)
How to Begin:
Contact Murray & Associates to see if you qualify for the program. Once approved by the Investor, then we will begin to look for the perfect home for you. The purchase price will be determined by the Investor and will be based on the Client’s income for an upper rental limit. For instance, if the Client’s upper limit for rent is $1500/month, the price of the home may be limited to $225,000.
Finding a Property:
Once you find a home, we submit the property to the Investor for approval. This will include the property information sheet from the MLS, the disclosures, photos, and a list of items the Client would like repaired/replaced prior to renting. This can include carpets, appliances, painting, etc. The Investor will evaluate the property and provide approval/disapproval within one business day.
When approved, the Agent will work with the Investor to submit an offer for purchase. At this point, the Agent works on behalf of the Investor.
After closing, the Investor makes the necessary repairs and the Client is able to move into the home.
The Client will sign a one year lease and Right to Purchase Agreement with the Investor prior to closing on the property. The lease will identify fair market value for rent with an annual increase of 3.75%* in the rental rate. The Investor contracts with a local property management company to manage the property and coordinate any future repairs with the Client.
The Client will agree to purchase the home for a specified amount to be increased by 5%* annually, which is the current annual appreciation rate for homes in Colorado Springs. When the Client is ready to purchase, they will make a loan application with a traditional lender and coordinate the purchase with the Investor. The Client can rent the home for up to five years and may purchase at any time within those five years.
If the Client decides not to purchase the home, they transition into a traditional renter where their two months deposit is treated as a security deposit. When the Client moves out of the home, their security deposit is returned minus any damages that are not considered normal wear and tear.
Where to Go From Here:
If you think this program is for you or you would like more information, contact Murray & Associates at 719-964-4810 or email@example.com.
I you aren’t sure if owning a home is for you, check out our Rent Vs. Own Analysis.
(*) Please note that these percentages are determined by the investor and subject to change.