The big shiny jewel in the crown of many retirees is a home paid for, free and clear. It’s an image of a stable retirement that frankly has been shaken by the recent economic times. Retirees have seen the value of their homes crashed to the floor thanks to the economic downturn.
In addition, retirees seeking to sell their home are having a hard time getting a person to buy. This can cause problems or opportunities depending on how situations viewed. A retiree thinking outside of the box just might be able to take advantage of an arrangement that ordinarily is used with younger people. It’s called rent-to-own.
Essentially, rent-to-own helps a person with a poor credit rating or without enough money for a down payment to eventually purchase a house. The fundamentals are a renter who pays a certain amount of money each month and part of it goes towards a down payment. This person has the option to purchase the house and the price of the house is ordinarily set at the time of the lease being signed. This situation can actually help an elderly owner. The renter is accepting a price on the house that is fixed. Granted, the ultimate sales price cannot go up but can’t go down, either. It is not very likely the owner will foreclose on the house, and as long as the renter pays on time the landlord is going to receive both rent and a little extra. When the lease finally ends, the retiree is able to sell the house to willing buyer and get a fair profit.
What about the flip side where a retiree is the renter? This, too, has some real benefits. Many retirees no longer want to be bothered with the upkeep of owning a home and are electing to rent a house. Rent to own means a person is able to rent a better than ordinary place with proceeds from the sale of his or her original property. The elderly renter can have a landlord worry about property taxes and the repairs. What’s more, the senior citizen who can’t immediately afford that dream retirement home can use the rent to own lease monthly payments as a means of whittling away the down payment, and buy the place at a price agreed upon years earlier. That would prove to be a wise financial move should the price of houses start to climb again.
It’s true with any lease that the danger is in the details. Any senior citizen who elects to go the rent-to-own route should carefully read the lease document, and even have an attorney look at it. There needs to be provisions to cover the possibility of a landlord having to foreclose. This is critical because the senior citizen may be forced to move. Rent-to-own ordinarily specifies an option fee which can be several thousand dollars. There also has been understanding of any penalties that may result from late payment. Retired people rent in order to avoid dealing with
maintenance. It should be detailed in the lease will be held responsible for any repairs due to damage or negligence. This is not to say that either party is going to be derelict in their duties. However, the lease is a legal document that needs to be understood and respected.
The Golden years of retirement are the days people yearn for in their working life. Such a time can be made more enjoyable if the burden of mortgage and house maintenance is lifted. Taking advantage of rent to own opportunities can allow a retiree both have a large piece of cake and eat it as well. All it takes is a willingness to shed the old habit of owning a house out right and rent with the option of a possible future purchase later on.
JR Diamond is a writer for Home Star Search, a nationwide database of rent to own homes. He is also a business coach and consultant who is well versed on a wide range of subjects.