Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
OP,
The rule of thumb in these situations is that you pay MORE per month for the ownership opportunity.
I hope that if you approach her with this deal, she sells the house immediately and the new owners evict you.
Thanks buddy. I am friends with the landlord. My approach would have been more along the lines of are you interested in this or shall we just continue our rental agreement.
Just a rule of thumb... you guys on this forum are useful but a little douchy! Just a young guy trying to work out how the world works.
I can see now that this is not a possible solution so I shall just keep on working hard and building my credit until I can get a mortgage one day.
I wanted to say further that what you COULD do is write up an offer of a lease/purchase or lease/option or rent to own, or whatever they are called in your area.
In exchange for some portion of your current rent amount rent being credited as down payment, you would agree to make all repairs yourself and close on the house with normal financing within 5 years. Then she would have guaranteed income with no unexpected expenses and you could be saving to buy a house. The house would still be hers until you get your financing, so the risk would be reasonable for her. THAT could be an offer she might consider.
Does she own the house free and clear or does she have a mortgage on it? Owner financing is pretty rare, because the house (typically) has to be paid off with no mortgage. If she is elderly, maybe she doesn't have one, but you don't know that.
Secondly, you may not be saving $700/month. How much are the taxes and insurance? You would be responsible for those, and those could be more than $700/month. Not to mention any maintenance, and the HOA dues and any utilities you aren't currently paying, which even on a house that the tenant pays "all the utilities" usually doesn't include things like irrigation tax. So there could be a lot of costs you aren't considering.
Also, most owner financing has a balloon payment after a few years. So you pay $x amount for y years, and then have to get bank financing and pay off the balance in full after say 5 years. If you don't, then she could foreclose on you. Also, owner financing usually comes with a substantially higher interest rate than the open market, so $1000 might not even cover the interest, depending on how high the purchase price is, so you cold be a 50 year loan or something at $1000/month. And even on owner financing, the buyer should always be required to have a sizable down payment.
Beyond all that, I agree with others here. If I received a proposal like yours from a tenant, I'd be highly suspicious of this person for the rest of their tenancy, and I would not renew their lease. The way you have described this screams SCAM!, whether or not that is your intention. I agree with fluffy that it sounds like you are trying to take advantage of an elderly woman who probably doesn't have anyone looking out for her interests.
If the lady really can't afford to make repairs, then she should sell the house in a standard sale. If she is upside down and can't afford to sell, then she couldn't do owner financing either. Your proposal carries a very high risk to her with VERY little benefit.
Thank you very much for your clear and honest reply!
My landlord does own both houses in full.
If I made an offer to my landlord she would know it's not a scam and that we have no intention of scamming her. We are honest and good people. She really likes my wife and I and we are just looking to find a home and start our family. She would have no reason to try and be rid of us because we are perfect tenants and would continue to be if she simply said "no". I'd just like to propose an idea and see if it would benefit all of us. We always pay our rent, I happily do a lot of DIY and maintenance on the house and yard that 99% of tenants wouldn't even bother. We have a baby on the way and are just considering our options. For work reasons we had to live in the UK for the past couple of years otherwise we would qualify for a bank loan.
We currently pay all utilities. We can afford the $1700/mo rent, that is not the issue and we can afford the future house repairs, property taxes etc. though we don't have money to put as a downpayment we are making a reasonable steady amount each month and have some money invested in shares that I would rather not touch if possible.
Hypothetically if she thought, I'll take $1500/mo (18k/yr) for the rest of my life and not have to deal with anything... Is it unreasonable to think that we could just have a written formal contract saying I own the house but I owe her $200k (rough guess) to be paid in monthly installments?
Maybe this was just a bad idea from the get-go and I should forget about the whole idea.
Please guys just don't think that I am a scam artist! I am not the brightest but I do always try to do right by others! I have never owned a house, my wife and I work very hard everyday and we just wanted to explore some possible ideas to start building some assets for our family to be.
Why would the owner take $12,000 per year when she can rent it for $20,400 per year?
Well if I offered say $1500/mo or 18k/yr then she would technically be earning more than she would renting because she would not have the expenses (taxes, repairs, maintenance, realtor fees etc). She would also be free of all of the stress that comes with leasing houses.
I wanted to say further that what you COULD do is write up an offer of a lease/purchase or lease/option or rent to own, or whatever they are called in your area.
In exchange for some portion of your current rent amount rent being credited as down payment, you would agree to make all repairs yourself and close on the house with normal financing within 5 years. Then she would have guaranteed income with no unexpected expenses and you could be saving to buy a house. The house would still be hers until you get your financing, so the risk would be reasonable for her. THAT could be an offer she might consider.
That's awesome advice, thanks!
I'll look into that, I am a bit wary of rent-to-own schemes as I have seen some bad press about them online but there could be something to it in this situation. I am almost positive that in say 5 years time my wife and I will have strong credit and would then be able to undertake a bank loan so that may be worth investigating.
Thanks for all of your help Lacerta, it's greatly appreciated!
Just a side note. Always use an Attorney who practice in the area of your concern. Also I don't think the kids would go for any deal unless it could be beneficial to them.
... Hypothetically if she thought, I'll take $1500/mo (18k/yr) for the rest of my life and not have to deal with anything... Is it unreasonable to think that we could just have a written formal contract saying I own the house but I owe her $200k (rough guess) to be paid in monthly installments?
Maybe this was just a bad idea from the get-go and I should forget about the whole idea.
Please guys just don't think that I am a scam artist! I am not the brightest but I do always try to do right by others! I have never owned a house, my wife and I work very hard everyday and we just wanted to explore some possible ideas to start building some assets for our family to be.
I don't think you are a scam artist, but I think the rent-to-own scenario that Lacerta wrote about earlier is your best bet.
Note, you wouldn't own the house until you finished PAYING for it.
Good luck, I hope it works out. (Note, your LL would need her own lawyer too!!)
Thank you all for your advice, I am going to research rent-to-own and see whether or not it will be worth pursuing.
Thanks all and happy holiday!
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Just a young guy trying to work out how the world works.
