Rising residential rental vacancy rates in Texas mean that Corpus Christi real estate investors are more open to creative solutions for their investment properties. Rent-to-own homes can be a useful concept for these landlords.
They're also a good solution for eager first-time homebuyers struggling to achieve conventional financing. These lease agreements can be a best-of-both-worlds solution for both tenants and landlords considering a property sale.
Read on to find out more about lease-to-own agreements in Texas.
Rent-to-Own Homes Explained
Rent-to-own agreements can help tenants work toward owning the home when their lease agreement expires. During the lease term, the landlord takes a portion of the tenant's rent toward a down payment on the home.
The tenant must also pay a substantial non-refundable amount in place of a security deposit at the beginning of the lease. This option fee is usually between 1% and 5% of the home's purchase price.
These payments give the tenant a head start on their payments toward the home and can make it easier to achieve financing at the end of the lease.
Corpus Christi Lease-to-Own Options
Rent-to-own agreements can differ in terms of the details, but they must comply with Chapter 5 of the Texas Property Code for disclosures during home sales. Texas law allows two different types of rent-to-own agreements as follows:
Lease-Option Contracts
Lease-option contracts are the more flexible of the two options. They give the tenant the first option to buy the home when the lease ends.
Although tenants won't face legal action if they don't buy the home, they're likely to forfeit any money paid toward the home's purchase price.
Lease-Purchase Contracts
These contracts are more binding than lease-option contracts. At the end of the lease, the tenant is compelled to buy the home, or they could face legal action from the seller.
Rent-to-Own Benefits and Drawbacks
Rent-to-own rental agreements can help eager home buyers avoid the complications of applying for a large mortgage on their first home. They can help sellers avoid the lengthy wait while their buyer applies for finance and skip the hassles associated with finding new tenants at the end of a lease.
They're a good solution for those who've found a home they like but need a little more time to get their finances in order. Rent-to-own agreements allow buyers to:
- Save toward a down payment
- Secure a good purchase price
- Improve their situation before applying for a mortgage
There are also a few negatives for tenants who enter into rent-to-buy arrangements. Some of these include:
- Higher costs
- Extra property maintenance tasks and costs
- No guarantee of achieving a mortgage afterward
Navigating the Corpus Christi Real Estate Market
An accomplished property manager or real estate agent can help buyers and sellers navigate the intricacies of rent-to-own homes.
PMI Corpus Christi is a full-service property management company with decades of experience in local real estate. We are dedicated to providing our clients with personalized service using the latest technologies and aspire to ensure landlords maximize every aspect of their properties.
Discover how we can help you with home-buying tips and effective solutions for every landlord-tenant situation.
