The sticker shock that comes from building or buying a home leads many people to think they will be stuck Long Term Renting forever. Before you give up your dream of home ownership, consider these alternatives to renting to help you save money or earn equity to get closer to your goal.
1. Rent to Own
Rent to Own opportunities are rare and don’t have an excellent reputation, but this doesn’t mean you should overlook them if you’re serious about buying a home soon. In order to make a rent to own situation work, you should meet the following criteria:
- A reputable mortgage lender has confirmed that you’ll be pre-approved for a mortgage pending one or two items on your application (employment history, debt payoff, down payment, etc.) within the next 12 months.
- You are looking to buy a home in an area that is becoming over-saturated with listings. A professional Realtor can help you identify local housing markets that have longer than average listing periods or higher than average home listing rates.
- You are willing to compromise on the type of home you will buy based on rent to own opportunities.
If you meet all three of those qualifiers, begin the research process and work with a Realtor who has helped other individuals or families achieve homeownership through rent-to-own scenarios.
2. Become Part of the RV Community
RV’ing is not what it used to be! With resort-style campgrounds and the availability of state-of-the-art RV’s, you may be able to save for a substantial down payment by ditching the high rental fee and becoming part of the RV Community for a year or two.
Before you consider this option, sit down with an experienced mortgage lender and determine how much you will need to save for the down payment and identify potential problems with financing an RV instead of signing another lease. If you have to borrow a lot of money for the RV, be aware that the debt may work against you in the future on a mortgage application.
3. Temporary Housing on Land
The housing market is very buyer-competitive in most major markets, but don’t let this discourage you from looking at land as an option. Ask your Realtor to give you a list of residential lots for sale that doesn’t have square footage or zoning restrictions.
Once you’ve identified several lots for sale, you can look at the total cost of putting a tiny house, a manufactured home, or a prefab metal building up while you save up enough money to begin your custom build project. If a tiny home is too small for your lifestyle or family, a metal building with custom floor plan designs will give you more control over the layout to efficiently section the building into rooms than a manufactured home. This option is usually the most long-term; do your research and get comfortable with the idea of living in a tiny home or pre-fab metal building for a few years while you save up for a down payment on a custom home. While the tiny home and manufactured home will be move-in ready, the metal building will require traditional home-building services, such as plumbing, electric, drywall, kitchen and bath installations, and floor coverings.
4. Investment Ownership
Did you know that if you purchase a duplex or a multi-family building, you can use the rental income from existing tenants as part of your qualifying income on the mortgage application? These property types are very rare but they do exist. Ask a Realtor who specializes in investment property for advice and recommendations for finding this type of property.
5. Consider a Condo
If your options for single-family homes are limited due to budget, the best way to bridge the gap between your income and owning the home you desire is to begin building equity as soon as possible. While many potential homeowners may be opposed to a condo, they fail to consider the ROI in buying a condo with the sole purpose of building equity. Luxury condos are generally the most affordable and flexible way to take advantage of equity opportunities in wonderful locations.
If you’ve tried to buy a home before and it didn’t work out, one of these five alternatives can put you on the path to homeownership much sooner than you think. Before you give up your dreams, look at one of these alternatives as a stepping stone to home ownership. Be sure to use an experienced Realtor and mortgage lender to help you make decisions that involve zoning, large investments, or additional debt.