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Kevin McHardy, an expert in Rent-To-Owns, joined Dave Debeau, the podcast’s host, to shed light on some of the practical aspects of Rent-To-Own venture. The ensuing conversation was informative and enlightening, providing listeners with genuine insights into the real-life applications of Rent-To-Own.
Kevin McHardy brings a wealth of experience in the Rent-To-Own field. Having spent years navigating its intricacies, his knowledge has become invaluable for those considering this housing option. During his conversation with Dave, Kevin shared some of his experiences, strategies, and valuable advice, contributing to a more comprehensive understanding of Rent-To-Own.
Dave Debeau, widely recognized for his engaging and informative podcast, probed into the depths of Rent-To-Own with Kevin. Dave’s masterful interview technique allowed Kevin to share his expertise to benefit all. His ability to clarify complex concepts makes the podcast an accessible source of information on Rent-To-Own.
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Understanding Rent-to-Own: A Primer
Guest Kevin McHardy, a seasoned real estate investor with an extensive background in rent-to-own situations, was invited to Dave Debeau’s show to delve deeper into this complex yet rewarding field. Kevin offers practical insights into the real-world applications of rent-to-own, breaking down the concept in a way any fifth-grader can understand.
In simplest terms, Kevin explains, rent-to-own is a transactional agreement between two parties – the homeowner and the tenant-buyer. The tenant agrees to rent the property for a specific period and can purchase it before the lease expires. The homeowner, in return, promises not to sell the property to anyone else during the agreed lease period.
Kevin points to the ‘option fee’ as a unique characteristic of the rent-to-own agreement. The tenant-buyer provides this upfront payment and monthly rental fees as a token of commitment toward purchasing the home. This option fee, he notes, is typically non-refundable and plays a significant part in securing the tenant’s option to buy.
Kevin describes the concept of ‘rental credits’ — an exciting feature of rent-to-own deals. A portion of the tenant’s monthly rent is set aside and contributes to the future purchase price of the home. This ensures that each rental payment the tenant makes is not merely a rental payment but also a tiny step towards ultimate homeownership.
Kevin emphasizes the importance of the agreed-upon timeline, a critical component in rent-to-own deals. This timeline can range from several months to a few years, giving tenants the flexibility to improve their financial status and save for a down payment on their future home.
The Pros and Cons of Rent-to-Own
During the podcast, Kevin McHardy shed some light on the double-edged nature of rent-to-own agreements. So, let’s dive into the benefits and detriments of this unique homeownership path.
- Opportunity for Home Ownership: Kevin McHardy mentioned that rent-to-own contracts offer a lifeline to those struggling to secure a traditional mortgage. This option provides a path to homeownership without needing a sizeable down payment or an excellent credit score.
- Locking in the Price: As highlighted by our guest, another benefit is the potential to lock in a purchase price at the start of the lease. This arrangement can be advantageous if property values increase during the lease term.
- Test Drive: Rent-to-own allows you to ‘test drive’ the property before making a long-term commitment, allowing you to spot any issues with the home or neighbourhood before you finalize the purchase.
- High-Risk Factor: Kevin McHardy cautioned that missing a single payment could result in losing the property and any rent premiums or option fees you’ve paid thus far. Hence, budgeting and regular payments are critical in a rent-to-own agreement.
- Responsibility: Unlike traditional rentals, as the potential owner, you may be responsible for all maintenance and repairs during the lease term.
- Locked-In Prices Can Be a Double-Edged Sword: While having a set price can be a boon in a rising market, it can work against you if property values decrease over time. You could end up paying more for the house than its actual worth at the time of purchase.
Kevin McHardy’s insights into the pros and cons of rent-to-own emphasize the importance of understanding every facet of this commitment before signing on the dotted line. Where there’s potential for reward, there’s also risk, and a rent-to-own agreement is no exception.
Rent-to-Own vs. Traditional Home Buying: What’s the Difference?
Now, you may be wondering, what differentiates rent-to-own from traditional home buying? Dave Debeau posed this very question to his guest, Kevin McHardy, to elucidate the key differences. Payment Structure
In a traditional home-buying setup, buyers usually make a hefty down payment and then continue making mortgage payments for their loan tenure. Kevin said that in a rent-to-own agreement, the tenant rents the property and can buy it before the lease expires. This setup allows tenants to build their credit and save for the down payment while living in their future home. Control of the Property
Traditional home buying means you get the legal title and control of the property as soon as the sale is complete. However, in a rent-to-own scenario, Kevin pointed out that tenants do not obtain ownership until they decide to purchase the home at the end of their lease. Flexibility
Buying a home traditionally means making a long-term commitment. If you want to move or sell, it may be more time-consuming and costly than in a rent-to-own agreement. Kevin noted that rent-to-own agreements allow more flexibility. As a tenant, you have the time to get to know the property and neighbourhood before committing to buying.
Kevin McHardy underlines the importance of understanding the difference between traditional home buying and rent-to-own. The latter arrangement can offer advantages for those who need flexibility and time to prepare for homeownership. Dave Debeau echoes this sentiment, stating both methods have unique implications and should be chosen based on the individual’s circumstances and needs.
Rent-to-Own: A Path to Homeownership
Kevin McHardy, a successful real estate investor, shared some invaluable insights on Dave Debeau’s podcast. He clarified that the rent-to-own path isn’t just a possible route to homeownership but can often be quite advantageous.
Rent-to-own, according to McHardy, offers numerous benefits. Control is one of the key advantages. With a rent-to-own agreement, the tenant-buyer can live in their prospective home while planning the purchasing process. This allows them to get familiar with the house and the community, giving them a taste of homeownership without the significant upfront financial commitment.
Time, another vital asset, comes with rent-to-own. The tenant-buyer can save more money during the lease period, paying off debts or improving their credit score to secure a better mortgage rate when the option to purchase comes along.
Nevertheless, McHardy emphasizes that a rent-to-own agreement is a serious commitment. The tenant-buyer needs to understand that this is not just a rental agreement but a plan to buy a home. This means they should be ready and willing to take on the responsibilities of maintaining the property, paying their rent on time, and, ideally, saving towards buying the house.
As a seasoned pro in the real estate realm, Kevin McHardy stresses the importance of guidance. He recommends working with a reputable rent-to-own company or a knowledgeable real estate professional experienced in these deals. Their expertise can help tenant-buyers understand the agreement terms, timeframes, payment terms, and legalities, ensuring a smooth and successful transition from tenant to homeowner.
Common Misconceptions About Rent-to-Own
In this segment, Dave Debeau encourages Kevin McHardy to highlight people’s common misconceptions about rent-to-own agreements. Unfolding each of them one at a time, Kevin explains the misconceptions and demystifies the complexities often associated with rent-to-own strategies.
Misconception 1: Rent-to-Own is Only for People with Poor Credit
Kevin McHardy clarifies that a common belief is that rent-to-own strategies are exclusively for people facing credit challenges. However, he highlights that this is not the case. Rent-to-own can be an option for various individuals, not solely those with poor credit scores. It can be a helpful strategy for self-employed individuals new to the country or perhaps saving for a larger down payment.
Misconception 2: Rent-to-Own is Unregulated and Risky
Another misconception Kevin addresses is that rent-to-own is unregulated and risky. While it might involve some risk, just like any other real estate strategy, it doesn’t mean it’s an unregulated field. Kevin emphasizes that, in reality, rent-to-own businesses need to comply with federal, provincial, and municipal regulations, as is the case with other business models.
Misconception 3: Rent-to-Own is Unaffordable
Addressing the affordability myth, Kevin emphasizes that rent-to-own properties aren’t inherently more expensive than conventional rentals. The main difference is that a part of the rent goes towards the eventual purchase of the property. As Kevin suggests, this method can be seen as a forced savings plan.
During this section, Dave and Kevin advise potential rent-to-own candidates to conduct their research, exercise due diligence, and make informed decisions before entering a rent-to-own contract.
Rent-to-Own: Is It the Right Choice for You?
Kevin McHardy steps in to handle this big question. He explains that there’s no one-size-fits-all answer. It depends on an individual’s financial situation, goals, and ability to take on homeownership responsibilities. Do you have trouble securing a traditional mortgage? Or maybe you’re unsure if you can settle into a forever home. These are scenarios where a rent-to-own agreement could potentially be beneficial.
Kevin shares his own experience as an example. He describes how he entered a rent-to-own agreement when he started. It was a viable option since he wanted homeownership but could not qualify for a traditional mortgage then. The agreement allowed him to move into the home immediately while working on improving his financial circumstances.
Dave and Kevin emphasize the need to assess your financial situation honestly. Being realistic about your finances and future economic stability is critical. Can you afford the rent payments? Furthermore, can you consistently make these payments throughout the lease agreement? Answering these questions truthfully will guide you in making the best decision for your circumstances.
Kevin points out that with ownership comes responsibilities—responsibility for maintenance, repairs, and other unforeseen costs. These are all critical factors to consider. Additionally, he stresses understanding the rent-to-own contract thoroughly. Being clear on the contract terms ensures you fully know what you agree to.
In conclusion, both Kevin and Dave recommend seeking professional advice when considering a rent-to-own agreement. They advise speaking to real estate professionals, financial advisors, and legal counsel to ensure you understand all the implications. A rent-to-own path can be a great vehicle toward homeownership, but ensuring it aligns with your financial and personal circumstances is vital.
Final Thoughts: Dave Debeau and Kevin McHardy Sign Off
In this podcast’s final section, Dave Debeau and Kevin McHardy share invaluable insights from their vast experiences with rent-to-own programs. As they sign off, they leave listeners with some essential pointers to remember in the journey of rent-to-own homeownership.
Kevin McHardy’sa veteran in the real estate industry and an advocate for rent-to-own programs has a few crucial tips to share:
- Understand your financial situation: Before deciding to embark on the rent-to-own journey, understand your current financial standing. This will help you determine the kind of property you can afford and whether a rent-to-own program is viable.
- Work with professionals: Navigate the complexities of rent-to-own contracts with the help of experts in the field.
- Manage expectations: While rent-to-own can be a viable path toward homeownership, it is essential to have realistic expectations.
Host Dave Debeau reiterates the process of doing one’s due diligence before diving into rent-to-own. Daveonesher emphasizes that renting to own is an empowering choice that can lead to homeownership for those who are diligent and patient enough to follow the process.
“There’s no magic quick fix to homeownership,” Dave said. “But with patience, diligence, and the right information, it’s within reach.”
As they conclude this discussion, Dave Debeau and Kevin McHardy affirm the potential benefits of rent-to-own in achieving homeownership and recommend thorough research and consultation with professionals before making any decision.
If you are ready to start investing today and want more information about how your mortgage may be secured – or are looking to apply for a mortgage today – click the link below for a free strategy call with our mortgage team at LendCity today.