I have gotten many questions as a sales rep about rent to owning a shed. It’s an important topic that a lot of shed companies shy away from because they are afraid of exposing their own shady practices. But here at Classic Buildings, we strive for opening communication and honesty. Because the truth, So that’s what I came going to give here, so let’s talk about why rent to own a shed.
Ok, so what really is Rent to Own?
This is an agreement that the shed company (or RTO Company) has with the customer. This agreement states that the customer agrees to pay X about of dollars per month over X about of months, and then the shed is theirs. If they do not end up not making their payments, the RTO or shed company has the right to repossess the structure. This is usually done without any credit checks or employment verification. Most RTO companies also offer early payoff so you could just pay the balance of what is still owned on the shed, and you’d be relieved from making any rent payments from there on out. For example, a typical agreement would go like this; $134 a month over 48 months of the shed. All that would be required is proof of identification and a couple of signatures.
That’s great and all, but what about the fine print?
Well first off most RTO companies will not allow you to use your shed as livable space or used for animals. In fact, they typically say that the shed can not be altered in any way.
Not only that, rent is far more expensive than traditional interest. Since there isn’t a credit check, the rent percentages can be up to 60%. But Rent isn’t calculated like interest is. For example, rent is usually calculated like this; a certain percentage of your monthly payment goes towards rent and the rest of the percentage goes towards your building. So unlike a credit card, putting more money towards your monthly payment doesn’t bring the rent down, it’s still priced out at the same percentage. So let’s say you have a $100 payment, and it was a 70/30 split. That means 70% is going towards paying off your building and 30% is going towards rent. If you make a payment of $200 it’s still going to be split the rent percentage the same. That means you would be spending $30 extra towards rent for that month, which really doesn’t serve you at all.
Our recommendation to our customers is to set aside the money instead of making bigger payments and then using that money towards the end to pay it off in full. Some companies are not transparent with you on that, so be aware and make sure you read your contract before you sign.
How do I know an RTO contract is for me?
Ultimately, it’s a decision you are going to have to make on your own. This is not official financial advice, nor are we experts in financing. However, here are some scenarios in which an RTO contract could be a good idea for you.
- You have bad credit, but you need storage, and you have extra monthly income to put towards a building. It’s cheaper than getting a storage unit in the long run.
- Â A big check coming, but you need or want your building sooner. You could make a few monthly payments, then pay off your building as soon as you get your check.
- You have good credit but are needing that for something else, like a new mortgage or a car. So you decided to do an RTO contract so it doesn’t touch your credit score.
This is why rent to own a shed could be a good idea for you.
I would say that RTO contracts in general are a great option to have. It’s usually better than paying lot rent at a storage facility. Now, a lot of companies who offer RTO can be bad actors and strong arm their customers into a contract because they know they can make more money by doing so. It’s very important that you read and understand your contract before signing.
