

Ask HN: Rent-to-own idea practical? - ph0rque

I’ve had this idea about a rent-to-own program that would let you change your place of residence while keeping your lease intact, in effect gradually building up your equity in a home. What are the holes in such a business model?
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poppysan
It could work.

What would need to happen in order for its viability is the host company needs
to either own or have management over a number of residences. They would also
have to have partner banks or provide the loans themselves.

It would work like this:

Company owns 250 homes in your target city. You get guaranteed for a mortgage
with them in advance. Then you select from their properties one that you like.
If the property does not fit your needs, you can transfer, after a year, to
another one of the properties, with a small moving fee, to another home in the
network.

Would take loads of money to accomplish but would be neat~!!!

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ph0rque
That was my thought initially; however, the more I thought about it, the less
I think it would be a requirement. There are condos/townhouses pretty much
everywhere; as you mentioned, the only additional layer needed is the mortgage
with a bank (or even a p2p lending service like prosper.com).

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poppysan
Another option could benefit renters, but would be hard to pull off.

For renters without a down payment, or that don't qualify for a loan can rent
a property, and an additional amount will be added to rent. If they fulfill
the terms of the lease, the good credit from the payments and the cash from
the overpayment of rent will be applied to purchasing the home.

Rent would be kept low with the promise of purchase after a given period. But
if the renter breaks the lease, the owner keeps the full accumulated rent (so
removing the discount).

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jacquesm
That many contracts don't allow you to do that ?

For instance, I have a house on the market right now waiting for it to sell
(tough luck!), but I'm not allowed to let it to someone else because of
contractual provisions by the bank that holds a partial mortgage.

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osipov
Competition.

I believe in English this business model is called "mortgage"

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ph0rque
Thanks for this English word.

I believe there is a large number of people who don't want to buy a house in a
particular area (either because of the fact that they'll be moving in a few
years, lack of any sort of downpayment, or other reasons), but still need to
live somewhere (and can afford to pay a certain monthly amount). This would be
the market this service would be aimed at.

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ErrantX
I'm still not sure I understand.

Based on your other comment here your not proposing a huge network of houses
etc.

In which case the only difference with a mortgage (and changing mortgages) is
a little less paperwork/legwork.

Or am I missing the point?

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ph0rque
To clarify, this hosting company doesn't go out and buy houses to then lease
out... they would vet the mortgage in the beginning (or a customer would go to
the bank to get a pre-qualified mortgage, if those things are still given out
by banks) and when the customer moves, the company assumes ownership of the
house to lease out to other customers or sell as it sees fit... I guess that
risk on the company might be too much to assume.

