Cherry Hill | Camden County | NJ | Rent to Own

After my post last week about rent to own opportunities, I received some interesting questions that made me realize how many misconceptions there are out there about how these types of transactions work. The most common one that I've come across is that many people believe that when they are purchasing a rent to own that 100% of their monthly rental payment is going towards the purchase price. This is almost never the case. Usually only the premium rent, which is over the market rental rate, is counted towards the final purchase price. This is very similar to a mortgage payment where only a small amount of the monthly payment goes towards principle and the remainder is interest expense.

I would like to point out that sometimes it is possible to get a much larger percent of the rental payment to go towards the purchase price, but this often will create a problem with financing the future purchase of the property. Many lenders will not accept this rent credit as a down payment, and will only recognize the premium rent payments. However if the buyer will be closing with cash or is using a nontraditional lender, this is a viable opportunity. Either way, the buyers in these transactions are getting the benefit of monthly equity buildup; it is only the magnitude of the equity that differs.

Joseph Cacciapaglia, MLERE
Realtor Associate®
R&I Realty
15 Potter Street
Haddonfield, NJ 08033
Office: 856.795.3111 x268
Cell: 979.218.2286
Jcacci1@gmail.com