How Our Rent-to-Own Program Works: Suppose you want to secure one of our rent-to-own properties. First you would need to complete an application (One person 18 years of age or older) and fax the application to us for approval. We will evaluate each applicant, first on a criminal background search, then on past evictions or foreclosures if applicable, and finally on credit. Most of our clients do NOT have perfect credit –which is OK- this program if for those who need time to correct past problems. This program is also great for those who don’t have the savings to purchase a home, but want to at least lock into a price now, before they go too high. Note that the Oregonian reported on November 15th, that October 2005 price increase for the previous 12-month period was 17.5%. Historically, any 10-year period within the past 20 years, shows a minimum average appreciation rate of 5% in the Portland metropolitan area.
How does our program work?Here is an example:Payments as low as $999 per month + Taxes and Insurance – 123 Main St., Portland ORPurchase Option price is $150,000. Only $1,000 down payment/option fee.The real payment on this property would normally be calculated as follows:$150,000 priceLess $1,000 down paymentBalance $149,000 at current interest rate – at the time of this example 8.99% (interest only) Payment would normally be $1,116.26 + current taxes and insurance. We will allow you to make payments now of only $999 per month – $117.26 less than actual payment. The difference of $117.26 is added to the balance due each month. This is called negative amortization. Your price was fixed at the signing of the option agreement and rental forms. In this example, your price is $150,000. You will get credit for the $1,000 down payment/option fee when you cash out with your own financing and provided that you have not been served any non-compliance notices and all rental payments have been made on time. We also share in the equity appreciation – On each anniversary of the option agreement, the price will increase 2.5% (after all adjustments have been made for negative amortization and any other mutually agreed upon adjustments). Suppose the value of the house appreciated 7% next year (a full 10% below this year’s actual appreciation). Current value $150,000 * 1.07 = $160,500 – new value. Also assume that you only made the minimum payment and had negative amortization to be added in the amount of $117.26 per month or $1,407.12 for the year. This is added to the current balance of $149,000, thus resulting in adjusted payoff balance of $150,407. An equity sharing premium is added to the adjusted balance at 2.5% per year, which now makes your anniversary year 1 payoff $ 152,663.22. How much money did you make? $160,500 less payoff $152,663=$7,837 less your $1,000 down payment = real profit (unrealized until you cash it out) $6,837. Don’t forget that you have to pay mortgage/rent to live somewhere. Another way to look at this is that profit is forced savings. If you take the profit and count it as savings on rent – Rent of $999 per month and estimate of $150 per month for taxes and insurance = $1,149/mo or $13,788 paid out per year, less the money you just saved $6,837 = real cost of living in house $6,591 or only $579 per month.
What if I want to pay more?You can always make the full interest payment, or make a larger payment to reduce the payoff balance.
When do I have to exercise my option?We give you 3 full years to exercise the option to purchase or pay us off. In the event that you have made all of your payments on time and you have had no non-compliance notices, we will give you a one year extension on the 3rd anniversary provided that you have given us written notice of the request for such an extension 30 days prior to the expiration.