Get out of your house and into a new one. As I was looking through the Sunday newspaper, I came across a article titled Lease it and leave it. It talks about a company that offers to rent your current home, allowing you to purchase a brand new one. The article was interesting so I began to investigate it. Below are some of my findings and thoughts.
How’s it work
The program will take your current house and place it onto the rental market. Your house will be rented for the going rate and the company will pay you monthly. The amount the company pays you will be completely dependent on the market rate for the house, less any management fees. The company will handle all aspects of the rental; finding a tenant, collecting the payments, and even miscellaneous house maintenance. All you have to do is continue to make the mortgage payments on the house. Every 2 years the company will work with you to decide if the market is right to sell, if not you’ll continue to rent the house. There is a limit of 6 years on the program. The bet is that the housing market will make a comeback and you’ll be able to sell the house at a much better price.
The company only works with builders of new homes. These builders are having a terrible time selling brand new home here in Michigan. The builder hires the company to provide this rental service in an effort to get people to purchase their new constructions. The company receives money from the builder and also takes a small cut from the monthly rental payment.
Why take on 2 mortgages?
The company states that moving into a new home will provide a location in a better community; which is safer, has better schools, and a house with extra bedrooms. The main idea behind the program is to provide customers the opportunity to purchase homes that are currently priced below their “real” value. The biggest problem for buyers is the inability to sell their current homes. The only catch is the amount of risk you are willing to be exposed to. Are you willing to carry two mortgages? Are you willing to absorb a loss if the housing market does not increase in 6 years?
What do you think?
Is it worth the risk to take on two mortgages (assuming you can get a second one)? Would you be willing to pay extra on your “rental” house to be able to make the mortgage payment? Do you think you’d really be able to turn a profit after 6 years?
If you are curious about the company here’s a link Market Place Homes