When doing a Rent-To-Own contract, you need to be careful. There are many people who have gotten burned in these scenarios as the owner later did not honor the rent-to-own agreement. But there are several steps you can take to reduce your risk.
The technical term for this type of transaction is "Lease with the Option to Buy". So the first part is the lease contract - which is generally a typical rental contract. The second part is the "Option to Buy" which specifies how much you need to pay for the "Option to Buy". Some key elements to look out for:
1. Does the upfront fee you pay for the "Option to buy" get credited toward the purchase price?
2. Is a portion of your rent credited toward the purchase price?
3. Are there conditions on the "Option"? example: if you pay the rent late one time, does that void the option contract?
4. What is the length of time before the "Option" expires?
A key step you can take to protect your interest is to insist on obtaining a "Memorandum of Option" from the owner. Then you can record this document with the county recorder, which will ensure that the owner can't sell the house to anyone else without you knowing about it.