Wall Street firms have found a new way to profit from consumers with blemished credit who can’t qualify for a mortgage: let them rent a home first with the option to buy it later.
The friction in this model is in judicial states where these contracts essentially are treated as mortgages thus in the event of default you need to foreclose out the renters interest. One of the other areas of concern is with the upfront option fees that are typically charged. Couple that with poor underwriting and this can start to look predatory. That said, there is a huge need for the product type given the inefficient mortgage market . Well executed, this is a fantastic solution for would be homeowners on the edge of qualifying for conventional loans. As an operator, the yields can be fantastic particularly if you approach on a triple net basis.