newsabouthomes's Journal: Rent to Own Lease Agreements Benefit Both Landlords and Tenants

With housing prices dropping drastically and lenders tightening restrictions on mortgages, many are finding it difficult to buy and sell homes. Rent to own lease agreements are convenient to both parties, allowing sellers to recoup their investments and renters to become owners.

How Do Rent to Own Lease Agreements Work?

Instead of selling a home to a buyer outright, the seller agrees to act as a landlord for a specific period of time, usually 24-36 months. The seller/landlord then applies a portion of the tenants rent payment to a down payment on the home. At the end of the lease term, the tenant is allowed to purchase the home outright from the seller/landlord.

How Do Rent to Own Homes Benefit Tenants

Many tenants who benefit from rent to own homes are those that do not have a down payment or sufficient credit score to qualify for a traditional mortgage.

-Renting to own, or lease purchasing, allows the tenant to build up equity in the home while repairing their credit and preparing for home ownership.

-The price of the home is locked in at the time the lease is agreed upon. This means that the tenant will always be able to purchase the home at the original price, even if housing prices go up.

How Do Rent to Own Homes Benefit Owners

Rent to own lease agreements are a huge benefit to homeowners. When the owner and the tenant sign the agreement, the tenant pays an option deposit. The homeowner sets this amount, and it is non-refundable. In addition:

-The homeowner can ask for higher rent in exchange for providing private financing over the term of the lease.

-The option deposit is non-refundable, so if the tenant defaults, the homeowner keeps the funds.

-The homeowner attracts higher-quality tenants who are interested in home ownership and are more likely to maintain the home.

-Even if real estate demand is low, homeowners will still be able to attract tenants and buyers.

Renting homes with an option to buy is a great way for landlords to sell their vacant homes in a tough market. It is also an excellent method for buyers who are looking to buy but are unable to get a traditional mortgage.

Renting vs Owning a Home