The lease-to-own option gives power to small buyers

A large number of small home buyers will consider participating in a list-to-own plan, a recent study from Javelin Strategy & Research shows.

More than half (55%) of Gen Zers and 37% of millennials are willing to enter into one of these deals, Javelin revealed in a report on mortgage lenders, “Mortgage Pandemic or Just the Sniffles: Fast-Track Cures and Long – Prolonged Improvement.”

Certainly, the rent-to-own agreement is less than 2% of the living conditions, but Javelin said that it points to a general business opportunity for banks, loans, savings and incubators.

In particular, they suggest that lenders should shift from focusing on long-term commercial mortgages to offering a set of lifestyle solutions based on the flow and changes in people’s lives.

Younger buyers are more interested in a “practice test” of any property they’ll occupy long-term, says Babs Ryan, the Find out more about Javelin’s digital lending practice.

“What they want is a chance to try something before they dive in,” Ryan said. “They don’t know if they like the house.”

While some prefer to rent-to-own with no money for a down payment, it is not universal. Satisfying renters and those in multigenerational households outnumber homeowners, as 14.3 million renters are estimated to move in the next 12 months with 5.4 million people already living there, according to US Census data.

“The No. 1 reason the mortgage market has been so depressed is that lenders haven’t given them reasons to move,” Ryan said. “They prepared the products after they decided to move, but they didn’t give them reasons to move.”

For Gen Zers and millennialsliving in a multi-generational home saves them money while they are not in a committed relationship, and also allows them to avoid a market where housing prices and interest rates are rising.

“The disease caused a lot of uncertainty in life, that’s what’s behind this,” Ryan said. “Why would I commit to buying a house or a condo if I don’t know what I’ll be doing three years from now? We’ve heard it over and over.”

Javelin found that, among rent-to-own buyers, the reputation is low, even though one company in the business, Landis, has business owners who confirm the famous names, Jay Z and Will Smith. Other companies are interested Home Road and fintech Divvy is also active in this line of business.

However, many of these arrangements have come under regulatory scrutiny for alleged credit spoliation, make a warning from then-New York State Department of Financial Services Superintendent Maria Vullo in 2018.

In addition, Property Management View settled a lawsuit brought by the NYDFS and Letitia James, the state attorney general, for $3.75 million in 2020. The company was later sued that same year. Michigan civil rights organizations for his actions.

Ryan said that most of the time until now, they have only offered to rent-to-own spaces to buyers because it was the only way for them to qualify and contribute to the legal sensitivity of Vision’s claims.

There is a huge opportunity for the mortgage industry in the rent-to-own space because “no one has found the right formula,” he said.

“If someone does, it will be very beneficial for consumers and it can be a win-win for investors,” Ryan said.

An example for American lenders to copy is Lloyd’s Bank in the UK, which not only offers “buy-to-let” mortgages, but has incorporated a business, Citra Living, which is reported to be invest in up to 50,000 newly built homes. That’s the foundation, Ryan said.

Dollars are often added to the list price, whether it’s for a home or a product. But examples that give part of the rent to the minimum payment can help people save for a house. And that’s one of hundreds of ways rent-to-own can do that.

Also, paying extra to get the option to get out of the deal is something that small buyers value, he added, and reiterated that the team is targeting do mortgage the improvement of the error problem.

“Instead of focusing on faster service or faster on board, they should focus on ‘why can I help someone move,’ create solutions to help people throughout their lives instead of just focusing on products for someone looking to buy something,” Ryan said.

One of the surprises Javelin has found is that many buyers view lease-to-own as an opportunity to try out the purchase of a second home or investment property will be provided.

This way they can see if the “snowbird” lifestyle is worth it for them, Ryan said. As for investment property, using rent-to-own allows the buyer to see if it can be a viable business for them.

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