General Question

segdeha's avatar

How does rent-to-own work?

Asked by segdeha (1707points) January 13th, 2008

We’re looking into doing a rent-to-own situation for our next house rental. How are these things usually structured? Anything we should watch out for?

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9 Answers

tammy444's avatar

you first pay a down payment then you pay monthly as you would rent then they give you a year or two to get a loan,but just know they are usally buying it themselves they ask 8,000 down give the owner 5,000 and keep 3,000 then you pay around lets say 800.00 rent and they give 500.00 to the owner and pocket 300.00 if you default they lost nothing really.
they gained ,and then they can start the process over from someone else.and they also make you have insurance and most make you pay for pets after all it,s not yours till paid your self.been there done that…

cwilbur's avatar

Watch out for rent-to-own in general.

In a conventional mortgage, you own the house, but the bank has a legal claim to it because they lent you money. While you’re paying off the mortgage, you’re building up equity in the house. If you stop paying or need to move, you still have the amount of equity you’ve already built up; since the first few years of a mortgage are mostly interest payments, this may not be much, but it’s something.

In a conventional rent-to-own setup, the finance company owns the house, and you have no legal interest in it aside from your tenancy. If you stop paying or need to move, you have no equity built up. You’re out any payments you made.

Rent-to-own situations strongly favor the bank or finance company.

Now, what you can sometimes do is enter a rental contract with the understanding that if you decide to buy, the money paid as rent will be accepted as the down payment. A friend of mine did this with a house in NYC that he thought he might want to buy. Of course, the rent was five figures monthly, and so he had accountants and lawyers to make the deal for him, so it wasn’t a conventional rent-to-own scenario.

segdeha's avatar

Looks like we’re going to go with a traditional rental agreement, but thanks anyway!

ironhiway's avatar

I bought my first place with a lease option. We asked the lady renting it for the option when we found out she was trying to sell it or rent it. The benefit for us was we could decide if it was worth it to buy it. The rent was the same as it would have been without the option. The benefit for the lady was she realized we were going to take care of the place as if we were going to buy it. The year lease gave us time to arrange the financial stuff down payment, loan, etc. Also she credited 10% of the rent and full deposit to the down payment. This was a positive experience for me.

carolynj23's avatar

How is the monthly mortgage determined when it time to buy the house?

carolynj23's avatar

I’m interested in renting to own. I’m very new at this, I had to file bankruptcy last year and i’m trying to build my credit score up. Someone has offered to help as in telling me about a home that she has for rent to own, I’m going to look at this house today.
Although i trust her what kind of contract i need to implement if i’m interested in renting to own?

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nads99's avatar

i own a house ,and would like to do a rent to own ,but i don’t know how it work? do i have to have a account set up for the down payment that i get from the tenant

alc85's avatar

My husband and I are thinking about doing a rent to own. The house is 79000. He only wants a small amount down and then we will pay 690 a month. He said 50 dollars of that will go towards the house each month… Its that rihgt??? So confused about this.

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