Disclaimer: This post may contain affiliate links, meaning we get a small commission if you make a purchase through our links, at no cost to you. For more information please visit our Disclaimer Page.
It isn’t always easy to purchase a home in New Jersey. Your financial situation might make it hard for you to buy a home through traditional means. But there’s another option available, as you can choose to rent to own a property in the state.
You can rent to own a property in New Jersey by using a few steps. The process is easy to follow, plus it allows you to purchase the home you are renting in a few years. You can even cover the cost of a down payment through the process.
Are Real Estate Agents Involved?
Before entering the process, you should know that you likely won’t come across any real estate agents when handling a transaction. Agents usually don’t get paid until they sell the homes they represent.
You will likely deal with a landlord who owns the property. The landlord will let you rent the property at the start and then sell it to you when you are ready.
Find a Property
The first step towards renting to own a property in New Jersey entails finding a home you wish to purchase. Not all homes in the Garden State are available as rent-to-own properties. A landlord might try to sell a property, or that person might only allow one’s house to be open for rentals.
Here are a few signs a property might be available through a rent-to-own process:
- A house has been on the market for a while.
- A seller might list a property as a rental. While the realtor might not specifically say it is a rent-to-own property, that person might be open to the idea.
- The home tends to go from one tenant to another, with long lulls in between each renter or owner.
You’d have to contact the realtor or landlord about the potential for a home to be a rent-to-own property. Check to see if whatever interests you the most is available and if there are no other conflicts in the way of the deal.
Prepare One of Two Agreements
You can work with one of two agreements when renting to own a home in New Jersey:
- You can establish an agreement with the option to purchase the home in a few years. You will pay rent on the property each month, and you won’t be obligated to purchase the home. But you will lose any money you paid beyond the rent if you choose not to buy the home.
- You could also enter an agreement with a purchase agreement. The effort requires a home inspection before you become the official owner. You would also need to be pre-approved for a mortgage before you start renting the home.
Establish a Purchase Price
The next step involves establishing a purchase price. You will agree to a price with the landlord or seller. The price should be comparable with the values of other similar homes in your area. Current pricing trends and shifts are also essential, as you don’t want your home to be more expensive than what it really is when you do purchase the property.
Order An Inspection
You must request a home inspection after planning the purchase price. The inspection will help identify possible concerns in your property, including what repairs are necessary. The review ensures you can address problems with your home before you start renting the space.
Pay the Option Fee
You will pay the option fee in the next step. The option fee is a charge that gives you the right to buy the home. You can adjust the value of the option fee based on an agreement with the landlord. The bill gives you the exclusive option to buy the home in a few years. The landlord will not be capable of selling it to someone else, as you have the first right to buy the home.
Establish a Rental Term
The rental term entails how much time you’ll have before getting the option to purchase the home. The rental term will last from three to five years on average. Whatever you choose, it should be long enough to ensure you can gather the funds necessary to complete an outright purchase.
Plan Maintenance Roles
Your landlord will still own the house after you start renting. Your contract requires agreement surrounding who is responsible for maintaining the property. These include details on who pays for repairs and other functions.
How Do the Rent Payments Work?
You’ll pay monthly rent payments when you rent the property. But before you start, you must plan how you’re going to facilitate those rent payments to make them work.
You can agree to a deal with the landlord where your payments in the next few years will be worth a percentage of the home’s value. But the payments will likely be a small bit over the regular rent value. It could be about 20 to 30 percent more expensive than a traditional payment. But the extra 20 to 30 percent you spend each month will go towards your eventual purchase of the property. In other words, you are essentially saving up for a down payment on the property.
Exercise the Purchase Option
You can purchase the home at the end of the rental term if you wish to stay there. The extra money you spent above regular rent values will cover the down payment. You can then complete regular mortgage loan payments on your home after it officially becomes your property. You will also have full control over how you maintain it, as you no longer have to pay a landlord for the property. But be advised that if you turn down the option to buy the home, you will lose whatever funds you would have used in paying for the down payment on the property.
These steps for how to rent to own a property in New Jersey are easy to follow. Be sure to plan your purchase well to ensure you can find a property you will appreciate and enjoy.
Looking to Rent * Buy * Sell Click Here
