pplaundry, Home Buyer in Baltimore, MD

how does rent to own work and is it a good idea?

Asked by pplaundry, Baltimore, MD Sat Apr 5, 2014

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Traditionally, lease-purchase agreements have been executed by an owner interested in giving a long-term tenant a shot at homeownership or those interested in expanding their pool of buyers in a tough market.
0 votes Thank Flag Link Mon Apr 7, 2014
Rent to own is similar to a car lease. Be mindful that rent to own is really not a good idea, therefore consider fixing whatever is preventing you from purchasing outright. Rent to own can be risky, it favors the seller so one could stand to lose a bit of money, therefore do inform yourself well, and consider consulting with an attorney who specializes in real estate beforehand. If you haven't done so yet, visit with any licensed loan officer, see if you can buy outright, or simply continue renting until a purchase can be made.
0 votes Thank Flag Link Sun Apr 6, 2014
There are two basic variations of rent-to-own: (1) Lease-option and (2) Lease-purchase.

With a lease-option, you rent a house and have the right (but not the obligation) to buy it.

With a lease-purchase, you rent a house and you also agree to buy it at some point in the future.

With a lease-option, there's usually an up-front option fee credited to the purchase price if you decide to buy. It's NOT a down payment. You don't get it back if you change your mind about buying.

With a lease-purchase, there may be an up-front down payment.

Typically, with either, a portion of your rent (it could be 10%-30%, more or less) is credited to the purchase price of the house.

Both have time-limits in which you can/must buy. That may be anywhere from 6 months (with a lease-purchase) or a year or so (with a lease-option) to 3-5 years.

Is it a good idea? Sometimes. It's not if you're able to buy today. It's not if you won't be able to even in a few years. But it often is if you're not able to buy now, but you think you'll be able to in 2-4 years.

Make sure you have a lawyer who understands rent-to-owns review all the documents before you sign.

Here's a link to a blog I wrote on how to find rent-to-own properties: http://bit.ly/findaleaseoption

Hope that helps.
0 votes Thank Flag Link Sun Apr 6, 2014
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
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Hello PPLaundry,

There a couple of ways you can work the opt to buy out. is it is a good idea? I would say that depends on your individual situation and the agreed upon terms. if you want to discuss it further feel free to contact me.
0 votes Thank Flag Link Sun Apr 6, 2014
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