Rent-To-Own Homes Pros And Cons

How Does Rent-to-Own for Homes Work? house key

What are rent-to-own homes and agreements? In rent-to-own agreements, tenants typically rent the home for anywhere from two to five years, paying above market-rate rent to build rent credits. When the lease-to-own agreement expires, tenants can purchase the home for the listing price, minus any rent credits they’ve acquired. If the tenant decides not to purchase the home when the lease expires, the landlord can decide whether to keep the individual on as a month-to-month renter, or ask this person to leave so the landlord can sell the home.

What Are the Advantages of Rent-to-Own Homes?

Renters who want to buy a home yet wouldn’t qualify for a down payment appreciate lease-to-purchase agreements. They can rent the home for an agreed-upon timeframe (typically several years), then have the option to buy when the agreement expires. This provides extra time to save for a down payment.

Individuals with poor credit can work to build credit while renting the home, so they qualify for a better mortgage loan when it’s time to buy.

Property owners enjoy steady rental income for the duration of the lease-to-own agreement, then receive a payout if the renter purchases the home. Some landlords like turning over properties through rent-to-own, using the influx of cash to trade up from older housing stock to more desirable (and prosperous) homes.

Property owners in tight real estate markets appreciate having options. Homeowners who cannot find qualified tenants for yearly leases may prefer to get someone under a rent-to-own agreement than to let a home sit vacant while they cover mortgage payments.

What Are the Disadvantages of Rent-to-Own Homes?

For renters, rent-to-own means putting more money upfront to build rent credits that will go toward the eventual real estate purchase. If renters’ personal situations change (for instance, they need to relocate) or they decide the home isn’t right for them, they’ll lose the extra money they paid.

If the price of the home declines over the course of the lease-to-purchase agreement, renters wind up with less of a bargain. The converse is also true: When home values rise, renters get a great deal on a property that may have been outside their budget.

For property owners, rent-to-own agreements work well in tight markets and when prices are flat. If the local real estate market heats up, sellers with existing rent-to-own agreements earn less money than they would have.

Individuals considering, “should I rent to own a home?” should have a real estate lawyer review the terms of any agreement. Sellers may put in clauses that disadvantage renters — whether it’s an escape clause if the market improves or a clause prohibiting late payments from earning rent credits.

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Should downsizing baby boomers rent or buy?

We can unequivocally conclude: It depends.

for rent

Rent here in the big city! (Photo: Drew Angerer/Getty Images)

It’s one of the most difficult questions people face when they sell a house: is it better to rent or buy? Writing in the Washington Post, Michele Lerner looks at the issue and talks to a financial advisor:

“Many of our clients who are at or near retirement like the idea of downsizing and moving into the city or closer to the city, and they assume it will be less expensive than maintaining a large home,” says Laly Kassa, managing director of financial planning at Chevy Chase Trust in Bethesda. “The reality is that it’s just as expensive to move closer to the city to an area that’s walkable and close to transit. Some are opting to buy, and some are opting to rent, but the decision is unique to each client.”

Lerner is talking mostly to wealthier people (the first couple has a second home in Italy) but for others, the house may be their biggest asset, and selling it unlocks that equity. And while I do go on about getting out of the suburbs and into a walkable community, you don’t have to move to the big city to get a taste of this; there are lots of university towns, for example, that are walkable, fun and affordable. And when you rent, you get to check them out without as big a commitment.

Jane Hodges of the Wall Street Journal notes that people with oversized houses and inadequate savings can do much better by selling and then renting. She writes:

Renting has both advantages and disadvantages for older consumers. On the plus side, renters typically enjoy a wider range of housing options, flexibility (a one-year lease is a short-term commitment) and the fact that building managers handle repairs, landscaping and snow shoveling.

The money question

Party in mom's apartmentParty time at my mom’s apartment. (Photo: Lloyd Alter)

Certainly that’s how it worked out for my parents. After they sold their house, they moved into a popular building but found the apartment a bit small and moved after just a few years. Their next apartment was huge, and when my father died, mom called the landlord and moved to a smaller apartment a few floors down. It was a building from the ’60s and had a terrible kitchen and no air conditioning, but the staff all knew her and watched out for her as she aged in place. With additional help in later years, she was able to stay in that building for 30 years.

Was it better for her to have rented all those years instead of owning? Probably, as she would not have seen the gain in value in her lifetime, and meanwhile her invested money did quite nicely and she was able to live on the income. You can’t eat a condo, and as John Maynard Keynes noted, “In the long run we are all dead.”

On the other hand, you can’t “fritter away” a condo or house; the money is locked up and could appreciate a lot more. There may also be tax advantages. But as Americans know from the Great Recession, housing prices don’t always go up, and they certainly don’t go up evenly across the country. Some homeowners are still under water 10 years later.

Renting may make more sense than buying for boomers for a lot of reasons, but here are the best of them:

  • It’s more convenient: None of the usual homeowner worries about maintenance and roof repairs apply — the landlord does it.
  • It’s more flexible: A condo is a real commitment, whereas a lease is much less of a deal and can often be terminated with a penalty if you really want to get out of it.
  • It can be cheaper depending on where you’re moving. People also underestimate the costs and insecurities of condo living where there can be high operating costs, special assessments and changes in taxes.
  • It might be easier at the next stage of your life. Things change, and if something happens and you have to move, it’s easier to move out of a rental than to dump a condo in a hurry.
  • You have money! Why not enjoy a bit of it instead of tying it all up in real estate?

Sanibel IslandSanibel Island might be a nice alternative right now. (Photo: Lloyd Alter)

Renting also offers some real opportunity to try out different parts of the city, the country or even the world for a couple of years, but buying pretty much ties you down. Just put all your stuff in one of Matt’s storage lockers and hit the road. That might be the best investment of your time and money that you ever make.

Lloyd Alter (  @lloydalter ) writes about smart (and dumb) tech with a side of design and a dash of boomer angst.

Here’s What A Federal Shutdown Means For The IRS And Taxpayers

Millions of taxpayers expect to be ready on January 29 when tax season opens, but will the Internal Revenue Service (IRS) be ready? In anticipation of a federal government shutdown, the IRS released its contingency plan for the filing season because, yes, tax season will go on even during a shutdown.

The agency said it does not “anticipate utilizing the plan” but that may be optimistic. On Thursday, House Republicans approved a bill to keep the lights on until mid-February but a similar bill in the Senate failed to garner enough votes. While Republicans control the Senate, they only have 51 votes, but 60 votes are needed to pass an appropriations bill, which means they would have needed support from Democrats. It turns out they needed more than that: Five Republican Senators voted no and one abstained (it’s worth noting that House Majority Leader McConnell (R-KY) cast a no vote as a procedural matter in order to raise the matter for reconsideration). You can see how your Senator voted here.

Without a deal, the government officially ran out of money for the fiscal year and shut down at midnight. Of course, shutdown is a loaded word since not every facet of government shuts down. For example, the IRS will maintain some functions, and those are outlined in their contingency plan. Specifically, the agency notes that “If the IRS is confronted by a lapse in appropriations during the 2018 Tax Filing Season (January 1 – April 30, 2018) the IRS will need to continue return processing activities to the extent necessary to protect Government property, which includes tax revenue, and maintain the integrity of the federal tax collection process, along with certain other activities authorized under the Anti-Deficiency Act.”

The Anti-Deficiency Act (text here) is a series of laws dating back more than 100 years. The Act is codified at Title 31 (Money and Finance) and is intended to stop federal agencies from spending federal dollars that aren’t authorized, as well barring them from accepting voluntary services (meaning that employees can’t work for free during a shutdown). The penalties for violating the Act are pretty severe, which is why federal agencies provide a written contingency plan.

During a shutdown, agencies are allowed to perform activities that are supported by funding that doesn’t expire at the end of the fiscal year, as well as other activities that are either expressly permitted under the law or are deemed necessary. Sometimes those activities cross over. For example, Social Security payments are funded outside of an annual appropriation, so those employees will continue to work, as well as those IRS employees who support them (even though IRS funding is not outside of annual appropriation).

How downsizing and decluttering are fueling the self-storage boom

A self-storage facility

A nation that buys together stores together: The self-storage industry has experienced remarkable growth over the past couple of years. (Photo: Mike Mozart/flickr)

As my colleague Lloyd Alter has pointed out, getting rid of stuff can be hard during an “era of minimalism and mobility.” We can downsize, de-clutter, edit and un-hoard until a satisfactory level of homey minimalism is achieved. We can KonMari until the cows come home. But at the end of the day, our jettisoned possessions — many of which we aren’t fully ready to part ways with — need to go somewhere.

In an ideal world, castoffs are hauled off to a secondhand store or charity shop where someone who truly wants or needs an antiquated but still functional kitchen appliance or an objet d’art of questionable taste promptly swoops them up. Our rejects are re-homed and reused — and the cycle continues.

Even better, superfluous furniture and bric-a-brac with no place left to go is handed down to friends and loved ones with the hopes that these things will “stay in the family.” But as Lloyd points out, this is easier said than done as potential recipients increasingly don’t want or simply don’t have room for them. Whereas my parents furnished a vacation home with possessions passed down to them, the situation would be much different if I were to be bequeathed with two moving vans filled with heirlooms. I live in a two-bedroom apartment in New York City and am at max capacity (and not an entirely huge fan of antique oak and chinoiserie).

Our newfound willingness to purge unwanted possessions from our homes has certainly benefitted one industry: self-storage.

Storage unit padlocked doorSo much for crawlspace and basements: As real estate developers embrace self-storage, stuff-burdened consumers clamor for storage space that’s affordable and close to home. (Photo: KOMUNews/flickr)

A multibillion dollar industry

As we continue to shed — but in many cases, not completely get rid of — stuff, the businesses of self-storage is going gangbusters. As reported by Bloomberg, there are an estimated 54,000 self-storage facilities spread across the United States, which, not too surprisingly, is home to 90 percent of the global self-storage industry. In 2016, this once super-niche industry generated nearly $33 billion in revenue –—that’s nearly three times Hollywood’s box office gross that year.

A recent look at the self-storage boom published in the Pittsburgh Tribune-Reviewnotes that the total square footage of rentable self-storage space in the U.S. in 2014 (a year or two ahead of the boom) could cover Pittsburgh more than one and a half times at a whopping 2.63 billion square feet. That same year, American developers invested $590 million in building new self-storage facilities. By August 2017, that number topped $2.2 billion.

“The demand has continued to grow. There’s so many factors coming together that have contributed to this boom,” Steve Mitnick, the owner of a Pittsburgh-area chain of self-storage facilities, tells the Tribune-Review. “From a developer’s perspective, it’s also become a more ‘sexy’ industry.”

Yes, nothing says sexy quite like a couple hundred corrugated metal cubes stuffed with dead grandmother knickknacks.

While Mitnick credits a confident economy for the self-storage industry’s exponential growth, Bloomberg points out that this trend has been building for decades. Over the past 50 years, Americans have simply become more likely to acquire new stuff with expenditures on durable goods increasing nearly 20-fold between June 1967 and June 2017. And as baby boomers start to downsize, all of these items accumulated over the years risk becoming orphaned. So, in many cases, they go into storage.

“The [self-storage] industry also thrives on disruption, serving as a temporary resting place for the stuff of the dead, the recently divorced, the downsizers and the dislocated,” writes Bloomberg.

stuff ready for storageMany Americans are downsizing and embracing a more minimalist lifestyle. But more often than not, accumulated possessions just get moved around and don’t truly disappear. (Photo: Beatrice Murch/flickr)

Meanwhile across the pond …

The self-storage situation in the United Kingdom pales in comparison to the decidedly more attached-to-stuff U.S. But self-storage has become markedly more lucrative to British developers. The number of renters in urban centers like London is rapidly climbing while the number of potential homeowners — defeated by astronomical home prices — continues to plummet.

According to a 2017 study, almost half of British pensioners are actively entertaining the idea of downsizing to a smaller, more manageable home. As this stuff-shedding segment of the population continues to age, the demand for self-storage units will only grow. Per Bloomberg, British real estate investors view this trend as a “Brexit-proof and recession-proof opportunity.”

The U.K. is home to 47 percent of European self-storage facilities, yet Bloomberg notes that the rest of Europe will likely catch up as “urbanization, smaller living spaces and rising property prices force homeowners to seek places to store their property.” Interestingly, teeny-tiny and tourist-overrun Iceland, which has the one of Europe’s highest urbanization rates, comes in third behind the U.K. and the Netherlands in per capita self-storage space.

A slowdown ahead?

While many industry insiders believe self-storage will continue on an upward trend, real estate research firm Green Street Advisors thinks the industry is poised for a slowdown in the near future. The reason?

According to Green Street, once-popular goods that tend to take up space are shrinking or disappearing altogether. Take photo albums, for example, a treasured but also space-hogging staple in many a self-storage unit now becoming obsolete as photo storage goes digital. Other items, consumer electronics in particular, that were once normally relegated to self-storage have also become so dainty in size that finding a place for them at home (or in the garage) is no longer as big of an issue.

What’s more, a growing number of consumers are opting, begrudgingly or not, to spend their money on services — health care, for example — instead of stuff.

For many space-strapped homeowners, particularly those in possession of family heirlooms that simply can’t be offloaded at the local Goodwill, the options are limited. The best advice is this: The next time you buy something of significance, don’t just consider its price, its durability or how it will look in your front room. Also consider if it’s worth a couple hundred bucks per month that you, or your loved ones, will have to pay to store it.

DACA Recipients Can Apply For Renewal, Government Says

The Department of Homeland Security says it will once again accept renewal requests from recipients of the Deferred Action for Childhood Arrivals program in response to a court order.

“Until further notice, and unless otherwise provided in this guidance, the DACA policy will be operated on the terms in place before it was rescinded on Sept. 5, 2017,” U.S. Citizenship and Immigration Services, a part of DHS, wrote on its website Saturday.

The Obama administration began the program in 2012, which enabled certain young immigrants brought to the U.S. illegally as children to apply for work permits and protection from deportation. As of September, about 700,000 people are currently protected under the program.

Attorney General Jeff Sessions announced in September that the Trump administration would wind down the DACA program. The administration said it was executive overreach and called on Congress to come up with a solution to the status of DACA recipients, also called DREAMers.

But a federal judge in San Francisco halted that plan late Tuesday and ordered the administration to resume processing DACA renewals while a lawsuit against the September decision moves forward.

The statement from USCIS says people who have already been granted deportation deferral under DACA can request renewal, but the agency will not accept new requests from people who have never received deferred action before. If someone’s DACA expired on or after Sept. 5, 2016, that person may file a renewal request, the agency says; people who received DACA that expired before then can file a new DACA request.

President Trump held a meeting with lawmakers on Tuesday about passing new legislation to allow the DREAMers to stay in the country, though he has pushed for funding for a wall with Mexico to be part of any immigration policy overhaul. He also received widespread criticism this past week after reports that he referred to immigrants from certain countries using a vulgar slur.

Copyright 2018 NPR. To see more, visit http://www.npr.org/.

DACA Recipients Can Apply For Renewal

Government Says DACA advocates march near Trump Tower in August in New York City. The government says it will resume DACA renewals. DACA advocates march near Trump Tower in August in New York City. The government says it will resume DACA renewals. (Spencer Platt/Getty Images)

By James Doubek –

The Department of Homeland Security says it will once again accept renewal requests from recipients of the Deferred Action for Childhood Arrivals program in response to a court order. “Until further notice, and unless otherwise provided in this guidance, the DACA policy will be operated on the terms in place before it was rescinded on Sept. 5, 2017,” U.S. Citizenship and Immigration Services, a part of DHS, wrote on its website Saturday. The Obama administration began the program in 2012, which enabled certain young immigrants brought to the U.S. illegally as children to apply for work permits and protection from deportation. As of September, about 700,000 people are currently protected under the program.

Attorney General Jeff Sessions announced in September that the Trump administration would wind down the DACA program. The administration said it was executive overreach and called on Congress to come up with a solution to the status of DACA recipients, also called DREAMers. Demand for Immigration Lawyers Surges in Central Valley Immigration Arrests Increase in Northern California Advocates Rally, Opponents Threaten Lawsuit After 5 Years of DACA But a federal judge in San Francisco halted that plan late Tuesday and ordered the administration to resume processing DACA renewals while a lawsuit against the September decision moves forward. The statement from USCIS says people who have already been granted deportation deferral under DACA can request renewal, but the agency will not accept new requests from people who have never received deferred action before. If someone’s DACA expired on or after Sept. 5, 2016, that person may file a renewal request, the agency says; people who received DACA that expired before then can file a new DACA request.

President Trump held a meeting with lawmakers on Tuesday about passing new legislation to allow the DREAMers to stay in the country, though he has pushed for funding for a wall with Mexico to be part of any immigration policy overhaul. He also received widespread criticism this past week after reports that he referred to immigrants from certain countries using a vulgar slur. Copyright 2018 NPR. To see more, visit http://www.npr.org/.

6 Steps to Severe Storm Recovery

Limit downtime with this post-storm cleanup checklist

Severe Storm

Do you know what to do if a severe storm damages your facility? Every minute counts after a natural disaster. This six-step checklist by emergency repair provider Cintas can help you minimize post-storm downtime.

  • Be aware of safety hazards. Loose debris and shock hazards are not uncommon after a severe storm event. Make sure employees know ahead of time how to shut off electricity in storm-affected areas. Even if electricity is down, it may be restored without notice, so take precautions accordingly.
  • Review your emergency preparedness plan. You should already have a preparedness plan with up-to-date contact information for emergency repair providers and instructions and checklists for emergency situations. Review emergency procedures during regular staff meetings to make sure employees know how to get help during a crisis and minimize panic during an emergency.
  • Inspect exterior glass and doors. Glass exteriors are two of the most important items to assess after a storm as they usually take the brunt of severe weather. Check the condition of handles, locks and weather stripping. Even small-scale damage like scratches, moisture buildup or hairline fractures can easily escalate into bigger problems and create hazards for employees and visitors.
  • Check the water lines. Flood-damaged facilities often suffer from plumbing backflow, pipe blockages and clogs. Avoid drain line backups and keep sewage out of your building by bringing in a professional to extract and jet the pipes after the storm.
  • Disinfect surfaces. Remove anything that has been contaminated by flood water and thoroughly disinfect all surfaces. Be careful when removing contaminated materials – it’s easy to spread contaminants to other surfaces.
  • Deep clean the floor. Any floor that has been affected by flood water needs to be deep cleaned, regardless of what kind of floor it is. Minimize bacteria and mold growth with cleaning chemicals, adequate dwell time and high-pressure steam