Real Estate

How Does Rent to Own Homes Work?

A Rent to Own, Rent to Buy, Lease to Own, Lease to Buy is more technically termed Lease Option. In a Lease Option or Rent to Own you are leasing the property for a period of time. This lease is typically the same lease as a standard rental with one addition. You have an option to purchase the property. Thus the term Lease Option.

Over the last few years many owners, investors, and real estate agents have started offering rent to buy opportunities, and over the last year there has literally been an explosion. This fact alone has gives rise to the many ways to structure a rent to own homes.

The majority of Lease Options contain two agreements, One Lease or Rental Agreement and one Option to Purchase Agreement.

Even though there are many ways to structure a rent to own homes most contain the following types of items:

Rental Payment

This is payment just like you would pay if you were just renting the property. All the standard items apply, late fees, and failure to pay will lead to eviction.

Option Price

This is the purchase price of the property.

Option Payment (down payment)

This is an upfront fee that is paid to the person who owns or controls the property. This payment is usually credited towards the purchase price of the property and almost always is non-refundable in the event you don’t exercise your option (buy) on the property.

Rent Credits

Rent credits are typically applied to the purchase price but only if you exercise your option to purchase the property. It should be noted that Rent Credits are not actual money that is sitting in a bank account. This is funds that essentially reduce the purchase price or can be used for closing costs when you bring in your own financing.

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