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The Pros and Cons of Rent to Own Mobile Homes

Rent to own is one of the ways in which you can buy a mobile home. We take a look at the advantages and disadvantages of this approach.

Rent to own is one of the ways in which you can buy a mobile home. We take a look at the advantages and disadvantages of this approach.

Mobile homes are a popular form of housing in America. As many as 20 million people in the country live in mobile homes according to census data.

One of the ways you can go about acquiring a mobile home is using through a rent to own agreement. These make it possible for you to rent a place while making a part of your payments towards purchasing the mobile home.

What Is a Rent to Own Contract

Most people looking for a place to live in are aware of two options ahead of them. They can either buy a house outright or they could rent it. One takes a significant amount of money but makes you a homeowner while the other is more affordable (at least in the short term) but leaves you reliant on others to rent you their home.

There is a third option available, which is a hybrid of those two. Rent to own contracts let people rent out a home for a period of time with the option of buying it when the lease runs out. The rents are usually higher than market standards since a part of it goes towards the purchase price for the home.

Let’s take a look at the pros and cons of signing a rent to own contract for a mobile home.


Market-Proof, Predetermined Price

In most cases, buyers and sellers entering a rent to own transaction agree on a purchase price for the mobile home. Buyers know exactly how much they will need to purchase the house when the lease runs out.

This is a huge advantage for those trying to buy a mobile home. Not only do you know early on what the purchase price, but you also don’t have to worry about market fluctuations affecting that price. This makes rent to own a great model for buyers in markets where home prices are expected to trend upwards in the near future.

Time to Improve Credit

A lot of would-be home buyers stay off the market because they don’t have a good enough credit score. You need to maintain a certain credit score to qualify for a mortgage and certain home buyer programs.

With rent to own, you don’t have to worry about lenders’ credit score requirements. You simply rent the home for a certain period of time with the option of buying it later. During that time, you can work on paying off your debts and improving your debt-to-income ratio.

Build Equity While Renting

When you rent a house, you pay for living in it without actually acquiring any part of it. With rent to own, on the other hand, every time you make a payment, a part of it goes towards actually buying the house.

This, of course, means that your monthly payments will be higher with the rent to own model. The homeowner is charging you for your stay there as well as your eventual purchase of the property. If you’re able to foot that slightly larger bill, rent to own is a great way to build up equity in a house while still technically renting or leasing it.


Sizeable Upfront Fee

When you sign off on a rent to own contract, you agree to pay what’s known as an option fee. This is a premium you pay to have the right to buy a property once your lease period is completed.

Options fees vary from contract to contract. It can be anywhere between 1% to 5% of the price of the house. The buyer and seller are free to negotiate this price with each other. Depending on the price of the house, the option fee could be a sizeable amount, making it an impediment for some buyers.

No Say in Important Decisions

When you rent to own a mobile home, you’re working towards purchasing the property. However, during your lease period, you are still considered a renter and have no say in important decisions regarding the property.

This can be a problem if the owner doesn’t do their part to maintain the property. They could stop investing in repairs or making mortgage payments somewhere along the way. Buyers should try to protect themselves from such scenarios with clauses in the contract as much as possible.

Depreciating Prices

As said earlier, the buyer and seller usually agree on an eventual purchase price for the property in a rent to own contract. This can be an advantage is home prices in the area are appreciating.

If, on the other hand, home prices are depreciating, then you could end up having a house that is valued at much lesser than you bought it at. You could always back out of the contract, but that means losing all of the additional money you’ve paid along with rent to build up equity in the home.

So mobile home buyers should try to make sure that the real estate market forecasts in their area are positive for the duration of their lease.

Given the unique way in which these contracts work, it can be a hard decision whether or not to sign a rent to own contract for a mobile home. Since its price is predetermined, it’s important for buyers to know how the market is going to trend in the recent future. So hiring a real estate agent is important if you’re considering buying a mobile home through a rent to own agreement.

Clever can help you find a top buyer’s agent near you to help make the decision. Clever Partner Agents are local market experts and help buyers with negotiations. Visit Contact Clever to find a Partner Agent in your city who can help you with your rent to own contract.


Reuven Shechter

Reuven Shechter is the Outreach Coordinator at Clever Real Estate, the free online service that connects you with top real estate agents to help save on commission. He spreads the word about Clever, disseminating studies to journalists and developing relationships with media outlets. Reuven is passionate about investing in real estate and creating lasting success for families. His writing has been featured in Max Real Estate Exposure, Leverage Marketing, and more.

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