From flips to rentals, from new builds to rent-to-owns, there are many different kinds of investing. But which one is right for you? While you’re weighing your options make sure you read this blog post where we share the 3 reason why rent to own investing can be difficult in Sacramento.
There are so many different ways to invest, and smart investors are always looking for how they can take their investing to the next level with new strategies and ideas. One increasingly popular way to invest is with rent to owns.
Rent to own investing is where you own a property that you rent out to a tenant, but with the expectation that they intend to buy the house from you in the future. Depending on how the agreement is structured, you might collect a deposit from them at the beginning, have them pay rent for a few years, and then complete the purchase of the property at an agreed-upon price in the future.
It can be a great way to invest – but is it right for you? If you’re doing your due diligence on this style of investing, then you should these:
3 reasons why rent to own investing can be difficult in Sacramento
Reason #1. Finding Tenants
Since rent-to-owns aren’t nearly as well-known as renting OR owning, it can actually be slightly more challenging to find tenants who are open to this. Fortunately, that’s changing and there are more and more people looking for rent to owns to live in. But not every tenant will want a rent to own or even know what it is.
Reason #2. Agreeing To Terms
Rent to owns are like any other real estate agreement – there are terms that both parties need to agree on. Those terms might include the amount of money the renter needs to pay, and when, as well as how much the house will eventually sell for. (For example, do you set a sales price today for 5 years down the road? Or do you set the price in the future?) And, as with any agreement, you’ll want terms that are better for you while the tenant will want terms that are better for them, so you’ll need to meet in the middle.
Reason #3. Responsibility
When you own a home, the responsibility for the care is obvious – YOU are responsible. And when you rent a home, the responsibility is usually well-established – the tenant is responsible for cleaning and basic upkeep while the landlord is responsible for maintenance, upgrades, and replacements.
But what about rent to own? It gets more confusing since you might have a rental agreement at first and then an ownership agreement later. So, who is responsible for the furnace or for fixing the roof? This will need to be figured out before a tenant moves in!
Rent to own properties can be a good way to invest but they can also have pitfalls and challenges. And these three challenges – tenants, terms, and responsibility – are 3 reasons why rent to own investing can be difficult in Sacramento. Fortunately, none of these need to hold you back if you are prepared.