Using Rent to Own Homes to Maximize the 2017 Salt Lake City Real Estate Market
Buying a rent to own home in Salt Lake City is an excellent way to take advantage of the current real estate market and prepare for the future property values. First let us get an overview of the housing market and then we will see how you can maximize rent to own homes.
Salt Lake City, Utah Housing Market Overview
The whole state of Utah is currently benefiting from strong economic growth. This has been the trend over the past couple of years and forecasters anticipate that it will remain steady throughout 2017. The 2017 National Housing Forecast prepared by Realtor estimates that nationwide the real estate market will slow down slightly in comparison to the past couple of years with residential real estate price increases of an average of 3.9 percent.
According to the forecast, Salt Lake City has been placed in the top 25 housing markets with a national ranking of 16th. The forecasted price increase is at a whopping 6.7 percent – nearly 3 percent higher than the national average!
2017 Real Estate Trends and the Impact on Rent to Own Homes
While a national property value increase of only 3.9 percent may seem quite small, the consumer price index is estimated to increase only 2.5 percent. That means that home values will increase more than rental rates. This is good news for buyers looking to purchase homes on a rent to own basis.
Especially considering that at present, it is slightly cheaper to rent a home in Salt Lake City than to buy according to a report by GoBankingRates. Buyers in Utah can use this to their advantage. While you will be paying an additional rental premium which is put towards the down payment, the base rent should be less than obtaining a new mortgage on the same house – especially if you do not have the full 20% for a down payment.
So how do you make all of these predictions work in your benefit when it comes to buying rent to own property? Easy. Apply these few tips and you can make the 2017 market predictions work to in your favor:
Make sure the rent is based on current market rates.You do not want to pay more than market rent. This does not include the rent premium – this is above the market rent as mentioned earlier. If your lease will be longer than one year, then make sure that the rent increases are based on the Consumer Price Index. This should keep your rent from increasing more than 2.5% annually.
Lock in a purchase price for the home when you sign the option agreement.
If you can agree on a purchase price at the start of the agreement, then when the market appreciates – and it will – the difference between the purchase price and the market value is equity in your pocket. There is a slight catch here, however. Lenders will usually only write a mortgage based on the written purchase price. While you may not be able to take advantage of the equity right away, it is still there. That equity can be accessed when you are ready to refinance.
If you wait until the lease ends and the option is activated to set the purchase price, the property owner will gain any market appreciation instead of you. As the property value increases, your monthly rent premium will add up to be a smaller percentage of the purchase price in the end.