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How is our INTRO co-investment program different than rent-to-own?

To understand the difference between our INTRO program and a traditional rent-to-own agreement it is important to first understand what this agreement entails and the main reasons why it generally does not work well for the client in the long run. A great source of information that explains the rent-to-own agreement’s basics quite well and outlines its main defects is “What’s the Catch with Rent to Own Homes? 7 Reasons to Beware of These Deals” by Christine Bartsch. In its most basic form, a rent-to-own agreement is a modified lease agreement combined with a purchase option agreement of the house at a pre-determined price. In principle this allows the client to rent the house for a couple of years while a portion of their rent is saved up for a down-payment towards the purchase option, which in turn needs to be executed before it expires. Our INTRO program on the other hand is a standard lease agreement combined with a co-investment agreement of the house at a pre-determined price. And while the difference seems small, its impact on the structure of the deal and the way it works from a client perspective is huge. Let’s review each of the 7 reasons Christine advises us to beware of rent-to-own agreements (R2O) and how our INTRO program is different.

  1. You’ll probably pay more in rent every month than you would as a renter
    • R2O: Credit you receive towards your down-payment may be less than the price you have to pay over market rent monthly.
    • INTRO: You are only responsible to pay market rent, not a dollar more. Any amount over the rent paid is optional and is 100% applied towards investing in your house.
  2. You’re paying less toward the price of the house than you’d think
    • R2O: Given the 2-5 year time frame of these agreements and the amount of the monthly credit to be paid towards a down payment, in the end, it does not amount to much.
    • INTRO: Every INTRO program agreement has a minimum time frame of 7 years, with the possibility to extend to 10 years. Additionally, there are no minimums NOR maximums payments towards the co-investment program. The added time plus the flexibility in amount co-invested allows clients to be able to accrue most if not all of the required mortgage down-payment.
  3. Most rent-to-own contracts require a nonrefundable upfront fee
    • R2O: Most rent-to-own agreements require between 2.5% and 7% of the agreed-upon price as an upfront, non-refundable, one-time fee. This fee is not credited towards the home purchase and is lost if the option is not executed.
    • INTRO: There are no upfront fees, period. The only requirement to enroll in the INTRO program is a minimum of 1% of the agreed-upon price as the initial co-investment, this means every dollar of this first payment helps you get closer to becoming a homeowner.
  4. You may lock in at a bad valuation
    • R2O: Rent-to-own agreements set the price of the home you are buying a couple of years in advance, so it is possible for the market to be on a downturn when the option expires and thus the client needs to pay the higher contract price.
    • INTRO: While the INTRO program does have a set price for the home there is no set date when the option expires and the house payment is due, the client can pay as much or as little as they want throughout the 7 to 10-year program. If there is a temporary downturn in the housing market, the client can decide not to contribute during that time without consequences.
  5. You’re on the hook for repairs to the house
    • R2O: In most rent-to-own contracts the tenant pays for all repairs and maintenance to the property during the contract period, even if you decide not to buy the house.
    • INTRO: Our INTRO program handles repairs and maintenance like a regular landlord would if they were renting you the house, this means that the co-investment LLC is on the hook for this. In practice what happens is that since you are a partial owner of the co-investment LLC you will be on the hook for only the proportion that you own in the house.
  6. Late or missed payments for any reason could kill the deal
    • R2O: Usually in rent-to-own contracts late payments and a long list of scenarios can trigger a default contract which in turn nullifies the rental percentage credit earned, thus you lose most if not all of your invested amount.
    • INTRO: While there are clauses to protect the INTRO program from delinquent tenants, the scenarios are clear and straightforward. But more importantly, even if such a delinquent scenario does arise the client does not lose their investment. What happens is the house is put on the market for sale and the client receives their proportion of the sale price, even taking the appreciation with them.
  7. The rent-to-own setup is vulnerable to scams and shady landlords
    • R2O: In rent-to-own agreements since the landlord remains the full owner of the home throughout the lease, they make the most money if you default since they get to keep the house and all the money you’ve paid. In its best form, this leads to misaligned incentives and in its worse to predatory landlords.
    • INTRO: In our INTRO program you become an owner since day one and your ownership of the asset protects your investment. During default this ownership is worth something and it is never lost in the process. This means that Mirabilis makes the most money if the program comes to term and the home is actually purchased by the client, we are as motivated as you to make sure this relationship works.

Hopefully, this has cleared up most of the concerns and why our INTRO Program is fundamentally different from a rent-to-own contract. Our objective is to make homeownership accessible to more people and to do it in a straightforward and fair manner. We believe that the only way to run a sustainable business is to offer real value to our clients and thus have satisfied customers, even if they decide not to purchase the home.

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