Lease-purchase and lease-option may sound similar, but there’s one very big difference: one is a requirement and the other is a choice. A lease-option versus a lease-purchase agreement These types of deals can be packaged very differently, however. In this case, a rent-to-own agreement made sense because both parties clearly stood to benefit from the arrangement - and they were willing to be patient with one another. “My house needed significant updates that I simply didn’t have the cash for, and my tenant was eager to buy in the neighborhood, but she needed time to improve her credit history and didn’t mind an imperfect property,” Rylander explains. Summer Rylander, a HomeLight contributor who sold her own South Carolina home through a rent-to-own agreement a few years ago, agrees.
In short: a rent-to-own deal makes the most sense when it’s going to be a win-win for both parties. “It’s more of a one-on-one deal based on the personal circumstances of both parties,” says Rick Fuller, a top agent in the San Francisco Bay Area.įuller explains that, in his market, rent-to-own agreements usually arise when a landlord is interested in selling their house sometime in the future, and they happen to meet a tenant who is interested in buying but still needs a little time to save up their down payment or raise their credit score. And because rent-to-own agreements tend to occur organically - they generally aren’t listed and marketed in the same way as conventional sales or rental offers - special terms can often be written in from the outset. These deals carry a risk for both buyer and seller, but renting-to-own can make sense if the deal is structured properly. There may be additional fees paid to the seller that will not count toward either your rent or your down payment, and you could also be on the hook for maintenance and repairs from the day you move in - but we’ll get into more of all of that shortly. “Most people considering a rent-to-own purchase either don’t have a high enough income or good enough credit to buy a house right now,” says experienced Washington state agent Hao Dang, who’s sold over 76% more properties in the Seattle area than the average agent.īut renting-to-own isn’t quite so cut-and-dried.
Then, when the lease ends - typically within 1 to 5 years - you’ve saved up a credit with the homeowner that effectively serves as your down payment.Ī rent-to-own deal means you can start paying toward a home purchase even if you can’t technically qualify for a mortgage yet. That’s exactly the dream that rent-to-own deals are selling, but what’s the catch with rent-to-own homes? Source: ( Shopify Partners / Burst) Rent-to-own basics: Crediting rent toward a future purchaseĪlso known as a lease-purchase agreement, a rent-to-own contract is an agreement between the tenant and the homeowner stipulating that a portion of the monthly rent is credited toward the future purchase of the property. But what if a portion of your rent were going toward purchasing your rental home at a later date? In the meantime, you’re still paying rent, maybe even more each month than you’d pay for a mortgage payment. It’s a goal that can take years of scrimping and saving to squirrel away a down payment - not to mention the careful spending and meticulous bill-paying required to keep your credit score high.
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