how does rent to own work?

Asked by Charish.thomas, Lexington, SC Sun Mar 11, 2012

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Jay Floyd, , Columbia, SC
Mon Mar 12, 2012
We have properties for lease/rent to own options. I personally own some properties and have "tenants/partners" lease to own properties In this market, lease/rent to own situations typically occur when a property owner cannot afford to sell their property for what they want or owe, and the buyer cannot obtain a mortgae with their present credit score, debt to income ratio, etc. If the owner and tenant agree, a lease/rent to own situation can be arranged. In all cases we work with, the person moving into the house will put down some money so they have some "skin in the game". In all cases, this is more than just more than one month rent, otherwise, that is simply a security deposit. We typically look for 5% down, or some provision for that amount to be reached by the time the house is closed on. When we do our rent to own properties, typically, none of the monthly rent applies toward the purchase price. We keep the rent as low as possible to allow the person in the property to work on their credit and then, if they have additional money to apply whether monthly or quarterly or whenever they have it, they can send that in along with their payment and that money is applied to their downpayment.

It is important to remember that if you do not purchase the property, the downpayment you made toward the house will be forfeited. You will want to be sure you want to purchase the property before getting into a rent to own situation. You will likely also be responsible for all repairs to the property during your stay there. This is just like purchasing the property from the bank except the you are working to be able to get the mortgage while you are staying there. You will also want to be in constant contact with your mortgage broker or credit repair specialist to make sure you stay on track to get the loan for the property within the time frames specified.

Questions you should ask are, what happens if I don't get my credit repaired in the amount of time specified. Our answer is typically, if you are taking care of the property, making your payments on time, and sincerely working on your credit, the time can be extended. It is important that the company you are working with is credible and they do not just move you in because they want the money, but that you are earnestly working on your credit and you will purchase the home. Typically, we write the lease for 1 year with the option to extend it based on circumstances.

Some things to watch out for are to be sure this is the house you want. Be sure you contact a mortgage professional or credit repair secialist and work on your credit. ALWAYS make your payments on time, even to "small companies" and never be late. This will drag your score back down. ALWAYS be on time or early with your payment and take care of the property as if it is yours...or better yet, take care of it like it is someone elses. Read your lease thoroughly and make sure you know what you are responsible for and get a home warranty if you are responsible for repairs. It's better to pay $350 to $400 a year than $4,000 if the HVAC goes out and you have to pay for that or move out because you can't and thereby lose your downpayment.

Lease to own properties are great for people who want to move into a house as their own but can't get a mortgage right now, but you have to do your homework and work with a company you trust. Just be smart about it. Call me if you have other questions on rent to own.

Jay Floyd
The Palmetto Real Estate Group of SC
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1 vote
Mark Meissner, Agent, Bozeman, MT
Sun Mar 11, 2012
Hi Charish.thomas,

There are several different ways that rent to own can work. In all cases it would be predetermined how much of your monthly rent would actually apply to some predetermined purchase price. I'm sure it varied from state to state, but some common methods would be lease-purchase, lease with an option to purchase, seller carry, etc. Often times too, a Seller will have an expectation of a down payment on the front end, and some set date in the future by which to close on the property. You should consult with a Realtor in your area to see what options may be available for you. Are there any other specifics we can help with? Thanks!

Mark Meissner
Sales Associate
ERA Landmark
Bozeman, MT
1 vote
Anna M Brocco, Agent, Williston Park, NY
Mon Mar 12, 2012
Rent to own is similar to a car lease; rent to own can be risky and one could stand to lose a bit of money, therefore inform yourself well beforehand and consider consulting with an attorney who specializes in real estate.
0 votes
Don Tepper, Agent, Burke, VA
Mon Mar 12, 2012
There are plenty of books on the topic. Here's a link to one I like (though you can find plenty of others, too):…

Hope that helps.
0 votes
Debbie Ander…, , Irmo, SC
Sun Mar 11, 2012
I have several properties that offer a lease/purchase option. Please email me at
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