Rent-to-own programs are once again increasing in popularity after losing steam back in the 1990s. Previously, small operators dominated the programs, but now with lenders setting the bar higher, more investors are choosing to hop on board with the idea.
For investors, it is a chance to profit off the recovering housing market. Consumers get a chance to lock in a home before they have the money together for a down payment. But the price may be higher rent in the interim and a higher purchase price the longer they wait to move from renting to owning.
The article explained that one of the fastest-growing rent-to-own companies is Home Partners of America, which recently spent $100 million to buy about 320 homes.
The perk of rent-to-own programs is that the consumer can decide not to purchase the home if it is more expensive than comparable properties in the area.
If price growth slows and the consumer thinks buying a home is a bad deal, they can walk away with no penalty and Home Partners would re-rent the home. The company says that they expect about half of their renters to ultimately purchase.