Jacob from Atlanta called into The Ramsey Show for advice on his unusual living arrangement. (1) The 21-year-old continued to live on the same property as his ex-girlfriend and her parents since the young couple broke up nine months earlier.
He told the show hosts he had $2,900 left on his auto loan and about $1,000 in credit card debt, but he recently started a full-time job earning $35 an hour and has around $4,000 in savings. So, he’s finally ready to move out on his own.
Dave Ramsey noted it was “super weird” the parents allowed Jacob to stay all this time — he and his ex-girlfriend lived in a tiny home on their property — and urged him to get out as soon as possible for his own sake.
Jacob said he found a house that’s rent-to-own and was wondering if it was a good opportunity to earn equity, but Ramsey quickly shut him down.
“You don’t need rent-to-own; you need non-homelessness,” Ramsey said. “You don’t build exciting from desperation, you build it from boring.”
A rent-to-own housing agreement can be an option for interested homebuyers who are unable to make a large down payment or secure a mortgage. An agreement is made with the property owner to purchase the home at the end of the lease term. In the meantime, the buyer can save up money, and part of their rent may also be placed into an escrow account to be put toward the purchase.
It’s common for rent-to-own contracts to include a non-refundable fee to secure the buying option. If a person decides not to buy the home at the end of the lease term, they typically lose both the fee and the money in the escrow account. Some contracts leave the door open for renters to opt out of purchasing the home after the leasing period, while others have stricter terms for liability.
Jacob said he found a house he could rent-to-own for about $1,000 a month and asked if it would be a good investment option to get him out of his current bizarre situation. Ramsey was skeptical, particularly given the low price.
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“You don’t need an investment right now. You need a place to live and not be homeless,” Ramsey said. “I actually would not do this house deal. I smell a rat.”
