NAVIGATING THE PATH THAT TAKES YOU FROM RENTING TO OWNING PROPERTY

If you’ve ever driven past a “rent-to-own” and tilted your head before, you aren’t the only one. It’s tempting to think about – simply renting a property means investing money in the now; you lose it as soon as you give it to your landlord. Does it entitle you to live in a home? Yes – but that’s it.

Renting to own, however, puts money towards your future. It not only enables you to live in your current residence, it also goes towards the cost of owning your home as well. This is big news – you’re spending the same amount of money but it’s working twice as hard for you.



This seems easy enough, right? It’s all smiles and the best way to become a homeowner, right?

Perhaps. It’s great news for future-homeowners who have credit problems and can’t ask banks for loans, but that doesn’t mean that this method of homeownership isn’t without a lot of risk. First-time rent-to-own participants are often very vulnerable to scams and other shady real estate dealings, so it’s important to stay realistic and informed about your decision.

The Pratfalls of Renting-to-Own

One way that scamming property owners try to get first-time rent-to-owners is through insanely high rental rates. Some property owners give tenants the option to either rent flat out or rent-to-own. These landlodrs are usually honest about their rates – after all, you can compare and contrast both forms of property renting.

It’s not abnormal to pay a little more for a rent-to-own deal, but scam property owners only offer rent-to-own options at steep rates, claim the price hike is because of future ownership and you won’t know the normal renting rate so you’re none the wiser.

Rent-to-own properties also require a lot more money up front. Regular rentals usually only require a few nominal fees, like a security deposit, first month’s rent upfront and a pet deposit if the tenant has animals. Because there’s obviously ownership involved with rent-to-own properties, something referred to as an “option fee” will be involved in the home owner’s process. This gives tenants the right to purchase the property at a fixed rate – meaning landlords can’t raise or lower the price once it’s set.

This can be great if your property is valued at a rate lower than what it’s actually worth, but the opposite is also true. Once you rent a property with a set price, owning it becomes detrimental when it’s valued at a price higher than its true worth.

Also make sure you’re paying attention to your contract. This is more than just a standard lease. When renting-to-own, you’ll have to sign a lot more than just a regular lease once a month or year. The most important part of this contract you’ll have to pay attention to is the rental period – while normal rental properties can be rented for extended periods of time, rent to own properties usually have a shelf life. Your landlord will request your rent-to-own period be six years to three months, and after that you’ll have to buy.

Sellers are also often the ones writing up these contracts. As your contract negotiator, landlord and property seller, this gives one person a lot of power. It’s essentially to get a lawyer on your side in order to make sure you’re being treated fairly throughout the process. Otherwise, you might end up in a worse position than when you started.

Written by Jason Gordon