To Rent or Own? What is Best for Your Business

To Rent or Own?  What is Best for Your Business

You’ve probably seen many rent-to-own commercials on TV covering everything from furniture to electronic gear, but did you know that 20 years ago that was how many families got into their first homes? Back in the days before lenders gave money to anyone who walked in their front doors, substantial down payments were required before you could buy a house. That helped to protect the lenders if payments stopped coming in and the purchaser was less inclined to walk away from the home due to the money they had invested.

While this was the intelligent way to operate and could have helped to prevent the mess we’re in now, this shut out a lot of fiscally responsible young families who hadn’t had a chance to save up a down payment. This in turn prevented homeowners with small homes who wanted to sell and move up to larger homes from moving forward with their plans. Many of these young families were able to rent these entry level homes with part of their payments being put aside into a fund that would eventually become their down payment. It was a win-win situation – the young family was able to purchase their first home, the sellers were able to buy a larger home, and if the seller was financially able, they sometimes financed the young family’s purchase and made a lot of money off the interest.

If you’re wondering what all this has to do with your general contracting business, I saw many contractors doing a rent-to-own with commercial buildings during the late 90s and early 2000s. If a small business was rapidly growing out of their rental space but didn’t have the financials to borrow money for a new building to be constructed, general contractors in the area often financed the building as it was being built and received rent payments from the business during the first several years the building was occupied. The building was then purchased by the business and the contractor was paid for constructing the building with a nice profit added in.

Of course this all depends on your company having the means to finance or obtain funding to construct a building and you have to do your homework as to the strength of the prospective customer (now and in the future), but I have seen it work successfully on many occasions. It’s almost like creating your own project. However, always consult with your attorney and accountant as a precaution before moving forward with this type of project.

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Posted on Nov 09, 2011 by admin | Posted in Construction Materials, Construction Project Management, Managing Suppliers

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