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Rent-to-Own Real Estate 101: Understanding the Pros and Cons and How to Succeed

Updated: Jan 17, 2023




Rent-to-own real estate, also known as lease-option or lease-to-own, is a unique type of home purchasing option that allows renters to eventually become homeowners. Under a rent-to-own agreement, renters pay an option fee and a monthly rent premium in addition to the regular rent. The option fee gives the renters the right to purchase the home at a later date, usually at a pre-determined price. This can be an excellent option for people who are not currently in a position to purchase a home but want to build up their credit and save for a down payment. In this video, we will discuss the benefits and potential drawbacks of rent-to-own real estate and provide tips on how to navigate the process.




Rent-to-own real estate, also known as lease-option or lease-to-own, is a unique type of home purchasing option that allows renters to eventually become homeowners. Under a rent-to-own agreement, renters pay an option fee and a monthly rent premium in addition to the regular rent. The option fee gives the renters the right to purchase the home at a later date, usually at a pre-determined price.


One of the main benefits of rent-to-own real estate is that it allows renters to build up their credit and save for a down payment while living in the home they hope to purchase. This can be especially advantageous for people who have had credit issues in the past or who may not have the savings for a traditional down payment.


Another benefit of rent-to-own real estate is that it can provide stability for renters who may be unsure about their future plans. Under a traditional rental agreement, renters may be required to move out at the end of the lease, but with a rent-to-own agreement, they have the option to purchase the home at the end of the lease period.


It's important to note that rent-to-own agreements are not for everyone and there are potential drawbacks to consider. One of the main drawbacks is that the option fee and monthly rent premium can be significantly higher than traditional rent. Additionally, if the renter decides not to purchase the home at the end of the lease period, they may lose the option fee and any other payments made towards the purchase of the home.

Another potential drawback is that a rent-to-own agreement can be complex and may require the assistance of a real estate attorney/solicitor or other professional. It's important for renters to fully understand the terms and conditions of the agreement before signing on.


If you're considering a rent-to-own agreement, there are a few tips to keep in mind. Firstly, make sure to thoroughly review the terms of the agreement, including the purchase price, option fee, and monthly rent premium. It's also important to have a clear understanding of the responsibilities of both the renter and the homeowner under the agreement.


Additionally, it's a good idea to have a real estate attorney/solicitor or other professional review the agreement before signing. It's also advisable to work with a reputable real estate agent who has experience with rent-to-own agreements.


In conclusion, rent-to-own real estate can be a great option for people who are not currently in a position to purchase a home, but want to build up their credit and save for a down payment. However, it's important to carefully consider the benefits and potential drawbacks and seek professional advice before entering into a rent-to-own agreement.

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