Do rent to own homes cause more nuisance complaints? That’s what Tona Gillispie from the Highland Park Neighborhood Association thinks. The Mankato City Council has passed an ordinance limiting the number of licenses to less than 25% of total units, which mirrors a similar rule passed in the college town of Winona.

“I look out my window and I’ve got five rentals looking at me,” complained Gillispie. “We want to retain the integrity of our single-family neighborhood. That’s what it was developed for in the first place.” She argues that rental homes in Highland Park account for 19% of the properties but cause half the nuisance complaints.

However, other urban planners say the new rule “will close doors to the elderly and the working poor.” Statistically speaking, the average buyers of rent to own homes have poor credit scores, lower income and fewer savings built up. However, there are many respectable, law-abiding families or seniors who fell into this category following the mortgage crisis and the economic stagnation.

There may be other ways to maintain the integrity of a neighborhood, without attracting riff-raff. In other rent to own real estate markets, sellers run criminal background checks prior to renting or require a $2,000 – $3,000 initial deposit to ensure the buyer’s commitment. Additionally, some of the problem may very well be that these homes are JUST for rent, without the lease purchase option added on.

Investors are slow to convert rental houses into rent to own homes because that means more paperwork and finagling for them, as well as less money. Since so many college students reside in Highland Park, it’s no surprise that many of these “nuisance complaints” are coming from rowdy students looking to party hard and take no responsibility for the upkeep of the house. By encouraging more rent to own homes programs, more families will move in or students will take better care of their abode, knowing that they may own it when their lease purchase term is up.

“We’re trying different things other than reducing prices,” says Leonel Alvarado, president of Century Builders in Fresno, California. “We’re trying to get a little action going.”

The aim is to help families who can’t qualify for a loan or save up a down payment. “Lender requirements are changing constantly,” Alvarado explains. “This is a safe harbor for people to be in until we get them settled with a lender.”

He says that the housing market is so slow, they’re offering rent to buy homes as a way of bridging the gap between buyers and sellers. Alvarado adds that, historically speaking, rent to buy homes have emerged periodically to combat real estate market downturns.

Alvarado says that Century Builders will help renters establish a savings plan and will assist with closing costs as well, but renters will need to come up with an initial $2,000 – $3,000 deposit to show their commitment. One reason developers stray from rent to buy homes is that some renters simply walk away once their term expires, shrugging off the loss as being a better deal than living in a cramped apartment for those three years.

According to the California Building Industry Association, California condo developers have been quicker to jump on lease purchase financing – converting apartment buildings into condos or clearing out the remaining inventory to fully sell off a building. CBIA president Alan Nevin said it’s hard for developers to offer single family residences as rent to buy homes because the math doesn’t work. “You’re supposed to get rent equal to 1% of the value of the house. That’s difficult to do with detached homes, even in Fresno.”

In Fresno, you can find the rent to buy homes at Polk and Gettysburg avenues, as well as Princeton and Brawley avenues. The houses start at $215,000 and the goal is for buyers using an FHA program to gradually save $6,400 (3% of the purchasing price) over a period of a few years. This could be impossible for Californians who are paying high apartment rents, but entirely possible when a portion of their monthly house rents go toward purchasing their rent to buy homes.

The real estate bubble affected Minnesotans in different ways. For some, their credit became damaged and their home foreclosed, forcing them to downsize into an apartment. Others were already looking to trade in mowing lawns and long commutes for hassle-free condo living when the market crashed. The developers were forced with a tough choice: drop sale prices, leave massive inventory sitting idly on the market for another year, or offer rent to own real estate.

In the Twin Cities, renters can choose between hundreds of unsold luxury condo units offered at $1,800/month, where condos go for as much as $450,000. In some buildings, only 15 out of 116 units have sold so far, so it makes sense for developers to partner with a financial institution like Prudential, to wait until the market rebounds, while offering the remaining units as rent to own real estate.

The problem is simple: “Buyers can’t get financing and they can’t sell their own home,” explains Mark Dziuk of the luxury Le Parisien Condos in Minneapolis. He adds that he rented 11/13 units in just five weeks by offering 18-month lease purchase financing. With low rents for $1,500 – $2,500, the developers are barely recouping building expenses. “People love our building. They get the benefit of this high-end home for the cost of an apartment,” Dzuik adds.

Condo developers are now competing with traditional rental apartments, which are rising to meet the demand – with 1,082 new units expected in 2008 and another 1,300 in 2009. The increased competition paved the way for the proliferation of rent to own real estate in Minneapolis.

Some existing condo owners are disgruntled about the idea of having neighbors who may or may not stay, and who may not take the same pride of ownership that they do. However, most developers are running criminal background checks and are taking steps to ensure that the units don’t “become party central,” that they instead maintain a high-class profile. As can be expected, the rent to own real estate market does open the doors for many people who previously saw the condos as unattainable properties.

Rent to own real estate can also be found at Mist on Minnetonka, where renters get to live in a $450,000 luxury condo for $1,800/month. In the Western Suburbs, rent-to-owners can move into to Hoigaard Village / St. Louis Park condo rentals.

Condo developers are generally wary of lease purchase because they’ve witnessed buyers walking away from their deposits, which prolongs the sales process needlessly. The argument is: Why wait if they can close the deal today?

Some say that the lease purchase condo market will remain small. “Young professionals who want to buy are still buying. People who want to rent are still renting,” argues Joe Cayre at Midtown Equities. He adds that buying is all about location and they’re poised for the rebound – although they still chose flexible options to keep the door open for people whose credit or savings may have been bruised by the mortgage meltdown. Bruce Cutright, the chairman of Midtown Miami Community Development District, reports that less than 20% of South Florida developers are offering the lease purchase option.

By contrast, market analysts say lease purchase homes – particularly single family residences – are in high demand. “While many realtors out there are starving, we’re expanding,” says Richard Wright of Krystal Real Estate Services in Pembroke Pines. He says that single family lease purchase homes are keeping them extremely busy. Wright has a list of lease purchase homes available in Broward and also offers a credit repair program.

Last year he had 125 properties on his list, but this year it’s inflated to 1,500 – prompting him to consider more innovative options to sell. “People can’t sell their homes,” Wright explains. “Rather than go through a foreclosure of let the home sit vacant too long, they’ll rent it out with an option for the renter to buy.”

Additionally, realtors trying to move a massive inventory of higher priced homes in the South Florida area are looking at the lease purchase option as a way of avoiding price slashing. This way they can still charge market value and buyers can still save for their future.

Usually when you think of lease purchase housing options, you think of a regular old house, no bells and whistles, nothing that would entice other buyers. I mean, it’s still on the market (using lease purchase as a last resort) for a reason, right? WRONG! In the Floridian market, you can find luxurious condo units next to all the amenities in an upscale neighborhood.

At Midtown Miami Condominiums, you can choose lease purchase financing you’re your $200,000 – $1 million luxury condo. Inside, you’ll have floor-to-ceiling windows, a private terrace, an Italian kitchen featuring custom cabinetry, stone countertops and stainless steel appliances, master baths with stone flooring, spacious walk-in closets and designer fixtures. The building has retail space, Jacuzzi and fitness facilities, a meditation garden, a business center, a rooftop swimming pool, valet and concierge services.

Lease purchase financing is a classic professional tactic used by developers to sell properties when the banks tighten lending standards so much that buyers can’t get approval even if they desperately want it. A Lease purchase agreement usually spans 1-3 years. The renter moves in without paying a hefty downpayment and begins paying a monthly “rent.” A portion of this rent gets put away by the seller as the downpayment on the house. The renter is allowed extra time to repair credit damage and save money. At the end of the agreement, the renter then takes over the mortgage to go on to own the house.

“And, with a greater number of buyers considering a lease-purchase agreement, sellers can have a greater opportunity to ensure their property reaps top dollar,” advises insurance underwriter Chuck Kovaleski. He adds that lease purchase offerings can prevent asking prices from dropping even lower, while still attracting buyers who feel they “just need a little more time” to get things in order. Essentially, it can be a win-win situation for everyone.

In South Florida, Midtown Equities is offering a lease purchase program that allows buyers to apply 100% of their first-year rent toward the condo purchase! The rental price is $1,500 (1 bed) or $1,900 (2 bed).

The Rent to buy homes market fills a niche as the middle ground between renting an apartment (where you throw money out the window each month and pay more for less) and owning a house (where you need a hefty downpayment and impeccable credit).

Have you ever wondered, “Where are the best markets for rent to buy homes?” It may seem like every housing option is either an apartment for rent or a house to buy, since many cities only have 1-3% of their housing stock available for rent. However, there are over 4,000 rent to buy homes in Florida. California and Texas  have over 3,000 homes to rent, while Pennsylvania, Ohio, North Carolina, New York and Michigan have over 2,000 rent to buy homes on the market. Illinois and Georgia are two other emerging markets.

Are you the type of person who should consider the rent to buy homes market? To answer that question, first consider how much you’re willing to spend on rent each month (assuming that a portion will go toward the downpayment on the house). Approximately 34% of the people in this type of agreement can afford a monthly rent of $750 – $1,000; 27% can afford $1,000 – $1,500; 27% can afford less than $750 and a small 11% can afford more than $1500.

One of the main reasons to consider rent to buy homes is the difficulty of saving a downpayment. Statistics reveal 44% of home renters have less than $1,000 saved; 21% have $2,000 – $5,000 saved; 21% have $1,000 – $2,000 saved; 8% have $5,000 – $10,000 saved and 6% have over $10,000 saved.

Another reason to consider rent to buy homes is that it buys you time to improve your credit score, while you have more space and ability to save. According to statistics, 33% of home renters have low credit scores (575-625); 31% have bad credit (under 575); 19% have OK credit (625-675); 10% have good credit (675-700) and 7% have excellent credit (700+).

In West Ashley, South Carolina an exquisite three-bedroom upscale townhouse at The Albemarle, a prominent luxury community, has sat vacant for the past year. Priced at $594,900 in an upsidedown market, the sellers have gotten creative and decided to try the lease purchase homes route.

Market analysts say the lease purchase homes option is gaining popularity as a way to bridge the gap between buyers and sellers. The tighter mortgage standards have marginalized many would-be homebuyers, leaving an overstock of homes – in many cases, homes that may foreclose or need to be sold right away.

“They’re a way that a lot more people can get into homes,” said Deborah Jones from Structure One Real Estate in North Charleston.

The number of lease purchase homes available in the Charleston area has increased from 1 – 3% of all listings over the past four years, with 700 lease purchase homes currently on the market (according to the Charleston Trident Association of Realtors’ Multiple Listing Service.)

Experts say lease purchase homes are for people who need time for their credit to repair or time to save money. It’s not recommended for people who need more than a few months to a year to fix their credit, for buyers who are unsure about wanting the house at the end, for people who could afford to buy a house right away or for people who don’t like the idea of having a landlord.

Rent to own real estate is in high demand across the nation and may signal a new trend in home ownership. The American dream is splintering – with all the divorces, home foreclosures, a shrinking family size and later marriages – the demand for flexible housing is high. Unfortunately, competition is driving apartment rental rates through the roof.  Additionally, people with the desire to own a less expensive home are finding that mortgage approvals are harder to come by.

In suburbs of New York City – including Long Island and the Hamptons – the industry seems to be adapting to take these changes into consideration. “Home sellers are best served by being a little more creative when it comes to financing,” says Patti Frank, the vice president at Americana Mortgage Group in Southhampton. “It’s smart for both the buyer and the seller, because the buyer doesn’t have as much up-front debt to the bank, and the seller gets to defer capital gains taxes on 25% of the same price,” she adds.

“I’m trying to open the field to more buyers,” says Zach Gazza, the owner of a $450,000 rent to own home in Flanders. “It’s more difficult to get approved from the banks – and they add fees – so I think owner financing is an attractive option for home buyers.” Gazza says that he’s offered rent to own property twice in the past – both which went without a hitch.  He likes negotiating directly with prospective buyers because the purchase process is easier and he has the legal right to foreclose if the purchaser defaults on the agreement.

Typically, rent to own property is seen as an option for lower income families or the middle class, but some sellers are using lease purchase financing to move luxury estates as well. For instance, seller L.A. Bek has sold more than 20 rent to own homes since 1997, including some residences adding up to $1.1 million. “This type of financing does help,” he claims.

Similarly, Corcoran Group realtors Janette Goodstein and Bonny Aarons are working towards their first rent to own real estate deal on a $5.75 million home in Amagansett. “Mortgage money has been difficult to get,” Ms. Goodstein explains. “This way, the property should close faster because we don’t have to wait for a bank commitment.”

The only real downside to rent to own real estate is when the purchaser opts out of the sale, which leaves sellers back to square one looking for new tenants and leaves purchasers out of a down payment and back on the street looking for new rent to own homes. However, with careful (and often free!) homeownership counseling, disaster can be averted and the dream buyer/seller can be realized.

Did you know that the rent-to-own industry is a $6.8 billion market? This niche began in the 1960s to help lower class families ascend into the middle class through purchasing power and greater financial flexibility. After all, many of us hit a rough patch – but it doesn’t have to cost us our entire future! Many reasonable hard-working individuals can get back on track if only given a little bit more time and a couple extra options. Rent to buy homes are perfect for people who may have lost real estate due to foreclosure, people who are just getting started, people who have experienced pay cuts, or people who suffer damaged credit of any sort. A financial blemish doesn’t mean you’re a bad person who should be penalized and forced to endure a difficult time every step of the way. Therefore, this lease purchase environment was created to assist people with the time and elasticity they need to meet their short and long term goals.

The majority of people looking at rent to own homes are hard-working Americans earning a weekly paycheck. This includes out-of-town families, college students, divorcees, skilled trade workers, temporary workers, military personnel and new parents.

For instance, Skye MacDuff and Rick Kerns are in search for their affordable dream home in Martha’s Vineyard where they can raise two-month-old Lily. “It’s not affordable here anymore,” sighs Ms. MacDuff, “especially for a young, starting-out family.” Even rental prices are outrageous – asking nearly a thousand for unfinished basement rentals or one-room bachelors.

This rent to own homes market is becoming more and more crucial for realtors who need to move big inventory, for the ex-house-flippers who see little reprieve and for those who just need to move but can’t sell. “Rent-to-own programs allow the purchaser to ultimately work toward being able to qualify for a mortgage while still building equity in the home,” said Long Island Housing Partnership CEO Peter Elkowitz. “Plus, it gives the seller a guaranteed income in the meantime.”

The lease purchase customer might be a first-time buyer without enough established credit to gain mortgage approval… or the lease purchase customer might be someone whose credit was damaged by foreclosure or a past bankruptcy. Some lease purchase people are in the military and may need to uproot in a few years, while other lease purchase customers are college students who are looking for proximity to their school. Regardless of what life has thrown at the lease purchase clientele, they are a large and diverse group that has created a rather large market for lease purchase homes.

From a landlord’s point of view, the lease purchase customer will provide them with a steady stream of income that can help pay off the existing mortgage during a time where empty houses sit on the market for months on end. From a tenant’s point of view, lease purchase homes allow them time to assess the neighborhood, try out the house and enjoy a more comfortable, spacious lifestyle without making any outright long-term commitments or hefty down payments.  For both parties, lease purchase homes give them time and flexibility to make the best decision.

In addition to lease purchase homes, consumers can find a variety of flexible items in lease purchase format: big-screen TVs, computers, musical instruments, furniture and cars. There are no credit check hassles, multiple payment options and affordable savings plans. It is estimated that there are roughly 50 million American consumers who fall between the cracks because they don’t have a bank account or good credit history. Many people don’t have the financial means of saving a $20,000 down payment for a house or dropping $2,000 on a television set. Yet, by spreading out their payments in affordable monthly installments, they can enjoy all the benefits without being penalized.

The important thing for both landlords and tenants to consider with lease purchase homes is the end of the agreement term. While it’s exciting and a fantastic solution when tenant and landlord first come together, all good things must come to an end. After three years, five years, ten years – whatever the specified term is – the landlord will need to present the tenant with the final paperwork, in hopes that the tenant can be approved to take over the mortgage OR they will need to gracefully evict the tenant if he or she does not wish to ultimately purchase the home. The tenant should be working toward repairing credit or saving money to own a home the moment he or she steps foot into the new lease purchase home. The day of reckoning should not come as a horrible shock, but rather a planned step. Financial counselors are out there to assist in planning short and long term goals. Lease purchase homes buy time, but they do not necessarily buy financial sensibility.