I disagree with him about avoiding rent-to-owns (lease-options, lease-purchases, etc.) But you have to know what's involved.
Here's an answer to your question: When renting to own, you pay rent to the current owner. That owner is your landlord. At some point in the future, you will purchase the property from him.
Please study up on rent-to-owns.
Hope that helps.
If so, you should be paying rent to the current owner (not a sublet tenant). Very basically, the renter pays cash for the â€œoptionâ€ to purchase the property from the current owner. An â€œOptionâ€ requires â€œconsiderationâ€. Consideration is monies.
Hereâ€™s a very important thing about these dealsâ€¦ The property owner is given the option money. If the renter chooses not to buy, the owner keeps the option monies. If itâ€™s as simple as a part of rent monies going to the option, the renter isnâ€™t financially hurt if they donâ€™t buy. On the other hand, if the renter puts up cash up front for consideration and does not buy, the renter suffers a financial loss, as owner keeps the consideration monies.
There are problems with this for both owner and renter. First of all, how is value determined today following a 1 year lease? Value will probably be lower than today. How much lower? Realistically, I canâ€™t think of a reliable way to determine property values 12 months into the future.
On a good note, I recently did a rent with option to buy. The property owner was honest. Realizing all of the above, he charged one dollar for the option to buy. We need more people like that.
A word of cautionâ€¦ Make sure you arenâ€™t residing in a property with a financially distressed mortgage as your option wonâ€™t apply to a short sale, or worst, a delinquent tax sale.