Profile picture for user4477715

interested in rent to own . what are the pro and cons ?

  • October 10 2012 - Randolph
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Answers (11)

Profile picture for sunnyview
Any agent that encourages their buyers to rent to own is not one that I would choose. 

You need an agent who is honest with you about whether or not you can afford to buy and can provide information on how you can get on the road to become qualified for a mortgage. Very rarely is rent to own a good option.
  • October 12 2014
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Rent to own is a no brainer if you be in an area for at least a couple of years, but even short term if you want to make a real estate investment can be a great move.  Every market is different so call if you would like me to help with this decision.
  • October 12 2014
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The Rent-to own is an interesting dynamic; the biggest thing to understand is they are all deal specific. Due to their nature you are setting up all of the terms directly with the seller/landlord. Typically your biggest benefit is that during a bull market with increasing price points you can in theory lock in a purchase price at current market value; if the market becomes a bear you can always decline your purchase option and renegotiate the purchase price or walk. The downside can be you may be neglecting an advantageous lending environment; remember the price you purchase is not the price you pay. With mortgage rates trending down in the last month, and already at historically advantageous rates. 

When initiating a rent-to-own deal you may be able to set up an equity deal where you pull a credit for a portion of the rental fee. You could also possibly use the lure of a sale to negotiate a better rental rate. This is all theory, in a market like we are seeing now; buy outright if you are able. 
  • October 10 2014
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Good Afternoon,



The pros are that you will be dealing directly with the Seller, therefore you might get a better deal than you would if it was on the open market. Also with rent to own it gives you time to increase your credit score to try and get a better interest rate. That is if your credit is not up to par. With rent to own, you also know the property inside and out, you know if the home as any issues when it rains or if wiring/appliances are not working correctly.


The cons are that you might actually decide to purchase another home when you are ready to buy, which means you most likely spent more money than you needed during that time. I've also seen instances were both parties agreed on a price, 3 years later the property value had decreased and the owner would not budge. The tenant then finished his last year and left, again losing more money in the process than needed. Lastly there is a risk with rent to own, unless you get a great attorney to cover all the bases (death of owner for example). You never know what might happen with the property.



Frederico Viegas







  • October 07 2014
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There are many good answers here, but I have to agree...at least from my own personal experience selling real estate in Southern California.  Rent to Owns aren't that great in this market...you might be better off saving some cash and buying in the open market when you're ready.

Best wishes
  • October 19 2012
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good luck tying to find one, the ones that might work are most times home that you would not want because the seller could not sell them on the open market.  Over 90% of buyers that get into these types of rent to own do not wind up buying the homes.  Those stats are from checking with local attorneys.
  • October 19 2012
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Profile picture for JPyszChicago
I don`t see rent to own a vital option in this market. I would not recommend it to anyone. Just my opinion. Yes, there are pros and cons, however cons out weight the pros. Just wait and buy when you really can.
  • October 18 2012
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Profile picture for pmzsteve
Only do it if you cannot obtain conventional or FHA financing. Chances are you will pay much higher downpayment and interest going rent to own. Plus the future market volatility (most likely to the downside) after the 2013 sales tax on home sold kicks in, you're going to be in a mess with this owner.
  • October 15 2012
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Lease (with Option to Purchase)
Pro's: 
1.  Price is either negotiated in advance or sometimes, buyer agrees to pay current market value at the time the option is exercised. (its more common to agree on price in advance) If the market increases, you have yourself a deal.
2.  You may improve the property during the agreed period.
3.  You can sell your Option and for a higher amount.
4.  Nobody else can buy the property during the agreed period. 
5.  You are not obligated to purchase at the end of the agreed period.
6.  You can negotiate a portion of the rent you pay during the lease period toward your down payment/purchase price.
7.  All terms are negotiable.

Con's:

1.  An amount is usually negotiated as "option money" and it is typically non-refundable if you choose not to exercise your option to purchase.Option money is generally not applied to down payment.
3.  If you inprove the property and do not exercise or sell the option, you will lose the amount of cost toward improvements.
4.  Likewise as above with reference to property value, if the values decrease, you may be committing to a purchase price you agreed to in the initial contract, and could lose value.
5.  There are tax benefits that you may not receive until the property is transferred into your name. 
6.  It is a difficult deal to come to terms with because the Buyer and Seller have very different goals when it comes to agreeing to price and option money.
7. Anything can happen during the lease period and up until the option is excercised (as others have detailed in their posts and pertaining to clear title being transferred)

There are also simple Options to Purchase, and Lease Purchase Agreements that differ in certain ways and from state to state. It is important to understand the differences and to have a Real Estate professional and an attorney assist with the documents and transaction.
  • October 12 2012
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A rent to own can be a good way to build equity and buy if you have credit issues, but there are risks involved. If you do the rent to own I would suggest doing a lease option (minimal option fee).

The biggest disadvantages are that the seller retains title and you rely on them to be making payments on their loan.

An advantage is that you hold equitable title and therefore the seller can't just evict you, unless you don't contest. If you have the lease option, you can exorcize your option anytime you are able to obtain financing.

In any event make sure your documents are in order. Have a real estate attorney draft them or at least review them.
  • October 10 2012
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Profile picture for wetdawgs
While the theoretical concept of rent with the option to buy may seem attractive, some of the realities are considerably less so.

Owners who will consider rent to own are very rare, so it will cut down your options for properties considerably.   I consider it much smarter to spend a year or two working on improving your credit and (if necessary) saving up a good down payment.   Yeah, it is tough to move but it even tougher to lose a lot of money attempting to buy.

Some features of rent to own:

1.  Down payment required - often substantial (say 10% or greater) and is not refundable (in most states) if the potential buyer doesn't purchase.

2.  Monthly rental is above fair market rent, with the only amount going to purchase is the amount above the fair market rent.  This is also not refundable.

3.  If not qualified for financing at the agreed upon  time and price, then you lose everything. 

4.  The price is agreed upon at the beginning of the contract, and housing prices may still be decreasing.

5.  You still depend on the owner to pay their mortgage.   If they fail, you lose.

If you do get involved in this, please involve an attorney in the contract.

  • October 10 2012
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