The housing crisis has affected various segments of the housing industry. Among these segments is the homes for rent business. Because of foreclosure threats, people in Brooklyn are now reluctant about renting condominium units.
Condominium owners had to do something to attract renters back. If the meltdown were to continue, units would eventually be empty and cash flow would be stagnant. Hence, some condominium owners in Brooklyn began to adopt a system that is used by most parts of the country – the rent-to-own system.
Through this system, renters have the chance to acquire the homes they rent. How does the system work? Renters would first have to lease a property of their choice. They would pay rent regularly until the lease expires. At the end of the lease contract, renters have a choice on whether they would like to purchase the property or simply end the lease.
Once they choose to buy the property, the accumulated amount that they have paid for rent would be deducted from the purchase price – nothing to lose on the part of the buyer.
Another advantage of the rent-to-own option is that future homebuyers essentially have the liberty to try their prospect home first before they decide on buying it. By the end of the lease period, they already have first-hand experience of living in the property and can wisely decide if permanent ownership of the property is worthwhile.
In the late 80s to the early 90s, a period when the market situation was unsound, even worse than the present market situation, the same lease-purchase trend was observed. However, according to experts, only around 5 percent of the rent-to-own clients actually bought the homes they rented because they were the only ones who had the capability.
Experts are hopeful that the situation will be different this time. If this system turns out to be a success, not only will homes-for-rent owners gain profit from property sales; renters will greatly benefit as well.
Leticia Carvalho has been educated in the finer points of the foreclosure market over 5 years.
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