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Investor responds to criticism about popular housing investment type

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Justin da Rosa | 07 Sep 2016, 08:15 AM Agree 0
Following an investigation that argued rent-to-own deals are risky for tenants, one expert in that space responds
  • | 07 Sep 2016, 01:09 PM Agree 0
    If the rent-to-own ("RTO") tenant had bought the house, they would be responsible for repairs. So that objection is not a valid one. They have the option to buy, which means that in the event of a market downturn, such as happened in 1970, 1980, 1990, and which is presently overdue, (some say imminent), the tenant can walk away leaving the landlord-owner with the loss. If a burst of runaway inflation occurs, the buyer benefits with his fixed option price. So that option has real value.

    The real issue is credit. The RTO tenant has say, 3 years to improve his/her credit. Often, an RTO seller will set up the buyer with a credit specialist to help the buyer ultimately be able to qualify for a mortgage. Some RTO sellers actually provide the financing in the form of vendor-take-back financing, using wrap-around arrangements to leave existing mortgaging in place and indemnify the buyer from it.

    Although individual circumstances and arrangements are each somewhat unique, I feel that RTO is an excellent opportunity for buyers as well as sellers. Criticisms of the arrangements smack of "entitlement". The buyer has to pay for repairs, work on improving his credit, take care of the house, and think and act like an owner. If the buyer can't live up to those requirements, he is not entitled to become the owner. He isn't entitled just because he breathes.

    The RTO deals are popular, and that fact speaks for itself.
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