Rent To Own

How Rent to Own Works in Real Estate


You’re ready to sell your house and you have an interested buyer on the phone. Unfortunately, this buyer doesn’t have the money for a down payment. Perhaps, their credit is preventing them from getting a loan. Either way, rent to own may be the best option. Sort of like a car lease, rent to own allows potential home buyers to get the house the way and allows you to have the piece of mind while moving.


What is Rent to Own?


Rent to own works much in the way that a car lease would. Basically, a buyer will move into the home with the intent to buy it in the long run. Unfortunately, bad credit or a lack of down payment is preventing this buyer to purchase the home outright. This is where rent to own comes in. Also called lease to own, rent to own works sort of like a mortgage/rental combined. Every month, the buyer will pay a certain amount in rent. If over a number of years, the buyers pay enough rent to pay for the house, the house becomes theirs. But if they default in payments, the money is treated solely as rent and the buyers are kicked out of the house.


Why Rent to Own Works


Rent to own works because, essentially, it provides a win-win situation for both parties involved. From the seller’s point of view, they get rent payments or a sold house, both profits in their book. From the buyer’s point of view, there is equal benefit. For those with bad credit or no savings, this is a way to make rent turn into a home in the long run. Rent to own is often the ideal for current renters who are tired of paying up to a thousand dollars every month for nothing.


What’s Bad About Rent to Own?


Rent to own can become a pain in the next if disaster strikes. For example, if a buyer defaults on their rent payments, a seller is now left with a house that they need to put on the market again. The house may also be in worse condition than when they first sold it, a problem that is actually rather common in defaulting payments. From the buyer’s side, rent to own can be a disastrous loss of money. If a buyer is putting all of their free cash into buying a house and than default, all of that money is lost. Defaults can occur if there’s injury, car troubles, and even grocery bills that take away from your rent payments.


An Option in Financing


Basically, rent to own can be the right option for many different buyers and sellers who are looking for a different way to finance a home sale. While most often, these sales go well for both the buyer and seller, it’s not unheard of for rent to own to go awry.