Rent-to-Own Homes: A Path to Homeownership in Nashville, TN

Rent-to-Own Homes: A Path to Homeownership in Nashville, TN

Fluctuating mortgage rates do not bode well for first-time homeowners wanting to enter the Nashville housing market. Just when it seems they're about to normalize, they shoot back up again, placing dreams of homeownership on the back burner.

What if you've found your dream home now and can't afford to wait? Rent-to-own homes could be a good option for you.

Keep reading to learn more about lease-to-own properties and how they could help you achieve your homeownership goals.

Understanding Rent-to-Own Homes

When a landlord and tenant enter into a rent-to-own agreement, the tenant agrees to purchase the home when the lease term expires. Instead of a security deposit, the tenant pays a large sum of money, called an option fee, upon signing the lease.

The option fee normally equals an amount between 1% and 5% of the home's purchase price.

During the lease term, the tenant pays rent as usual, but a portion of this payment goes toward purchasing the home.

In Tennessee, these agreements are regulated by the Uniform Residential Landlord and Tenant Act and the Tennessee Rental-Purchase Agreement Act. You must consult a lawyer when entering one of these arrangements.

Rent-to-Own Options in Nashville, TN

When you engage in this route toward Nashville real estate ownership, you can sign one of two types of contracts. These are:

Lease-Purchase

A lease purchase contract compels the tenant to purchase the home when the lease ends. Lease purchase agreements are enforced under Tennessee law, and the property owner can sue the tenant if they don't follow through with the agreement.

Lease-Option

This type of arrangement means the tenant has the first option to buy the home after the lease expires. They aren't legally bound to buy the home, but they will lose all payments they've made toward purchasing it.

Pros and Cons of Rent-to-Own Agreements

Soaring property prices and the increased cost of living can make it difficult for prospective homebuyers to achieve traditional home financing options when they discover their ideal home. If you find yourself in this position, a rent-to-own agreement can help you:

  • Secure a favorable purchase price
  • Improve your financial situation before applying for a mortgage
  • Save for a down payment on the home.

The negatives associated with rent-to-own agreements revolve around increased costs. Usually, the tenant must pay:

  • A larger upfront deposit
  • Additional maintenance and repair costs
  • Higher monthly rent

There is also no guarantee that they'll receive their desired finance by the time the lease ends.

Make Your Nashville Real Estate Goals a Reality

Rent-to-own homes are one of the more unusual property investment strategies, but they can work well for buyers and sellers in certain circumstances. It costs more to rent this type of home, and you must ensure you get legal advice before entering into one of these agreements.

PMI Middle TN can help you navigate these and many other property-related issues. Our experienced team is skilled, qualified, and ready to assist you with sound investment advice and a host of property management services.

Client satisfaction is of utmost importance to us; reach out to find out how we can help you.

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