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Chapter 1: What are Rent to Own Homes?

For many homebuyers, the prospect of homeownership is synonymous with the American Dream. Individuals used to work hard, save their money, qualify for a home loan and then finally purchase the home of their dreams. If only that formula was still reliably applicable to today’s housing market!

Unfortunately, due to the massive problems with the real estate market in the last few years, qualifying for home loans has become a challenge for prospective homeowners. While that might seem like reason to put off any dreams of homeownership, consumers do have other available options. In a situation where an individual cannot qualify for a home loan, they might want to look at rent to own homes, often referred to as lease to own properties.

In Rent to Own homes, the renter enters into a deal with the landlord to buy the property by a set date in the future and at the present-day market value.

How do Rent to Own Homes Work?

Rent to own transactions differ from traditional home purchases. The potential renter enters into a deal with the landlord to buy the property by a set date in the future and at the present-day market value. While the renter is actively paying rent, considerations need to be taken in order to effectively save for the required deposit. In some of these scenarios, a renter will not only have established such an arrangement or agreement with the landlord, but also may well pay said landlord additional rent towards the deposit required to make the final purchase.

The whole point of rent to own properties is to allow prospective buyers to make the final purchase at a later date. This means is that instead of a renter just agreeing to purchase the piece of real estate at a fixed cost, he or she is smartly putting forth payments toward the eventual purchase of the residence by way of additional payments.

An example of Renting to Own a Home

The following is a very simplified example to help consumers further understand rent to own homes. For instance, a buyer finds a property they like commits to a lease of two years for said property. At the same time, the buyer would then pay the owner of that residence a fee of $1000, which is called the “option fee.” This means that the intended buyer is going to occupy the residence for the period of those two years.

Within those two years, the prospective buyer can either purchase it or pass on the purchase. During that two-year period, the seller only has the option of selling that property to the intended buyer.

However, consumers considering this option should realize that they will have to forfeit the option fee” if they decide to pass up on the chance to eventually purchase the residence.

On the flipside, if the prospective homebuyer ends up buying the residence inside of the specified time period, they will routinely receive their “option fee” back in the form of a credit.

What is the Difference between Rent to Own Homes and just Renting?

Some individuals hear the term, “rent to own homes” and confuse it with renting a home? Both terms include the word “rent,” which is a cause for some confusion. It is important to realize that there is a big difference between renting a home and renting to own a home. To help clear up some common misconceptions and confusion,  the following will clarify the differences between the two real estate concepts.

Rent Money

When renting a home, the rent money paid each and every month will be lost forever. On the other hand, when going the lease option route, a fraction of the rent that is paid will be put toward the down payment or even the price of the home. The rent paid on rent to own homes is similar to a savings account. The money that is put toward the down payment or home price in a rent to own contract is referred to as “rent credit.”


When renting a property, consumers have a landlord that probably will not want to sell the property to anybody. While one could view the seller as the landlord in a rent to own transaction, this is not a an accurate picture. It is more accurate to view the seller as a motivated seller who eventually wants to succeed at selling the home to the renter, who will eventually become the new owner.

Purchase Price

In the case of a rental property, the purchase price will never be discussed or even referred to at all since there is no desire for the property to be sold. With rent to own homes the purchase price is actually determined at the beginning of the agreement. The purchase price that is determined at the beginning of the lease will be done through something referred to as the “option to purchase.”


With a rental property, the landlord is actually the one who is accountable for making all the repairs that the property requires. In the case of rent to own homes, this no longer applies, mainly because there really is no landlord. Since the person renting the home will be the eventual owner in a rent to own homes scenario, they are responsible for any and all repairs. After all, the renter will be eventual homeowner, so he or she will be treated as such.

Cost of Rent

If one rents a property, the ensuing cost of rent is going to be set based upon the market rates. For rent to own homes, the rent is likely going to be higher than what the normal rent would be because a fraction of it is going to be reserved either for the down payment or as a contribution towards the actual selling price. This allows the eventual buyer build up some equity as he or she is anticipating an eventual purchase.


Prospective buyers interested in rent to own homes will find that offers many exciting benefits. This website allows homebuyers to use an easy search engine to find rent to own homes in any number of places right across the United States. For example, an individual may want to search for rent to own homes in Los Angeles, California:
The following quick and easy search results immediately pop up on 

Going further, buyers can then click on the search results to open up an individual property webpage:

Stay Protected

Even with rent to own homes, certain problems may come along, which is why buyers must learn more about protecting themselves effectively. It is imperative to remember never to deal with an owner who has financial problems, since they could end up losing the property while the buyer is engaged in a lease option transaction.

To guard against this situation, one could easily insert the necessary lease payments into an account that goes directly to the home lender. Of course, when a buyer is considering rent to own homes, it is important to check to ensure that both the insurance and the taxes have been paid.

At a Glance

What have we learned about rent to own homes? We have learned that:

  • Lease option deals allow home ownership for buyers who have a hard time qualifying for a home loan;
  • Lease option agreements are agreements between a renter and a landlord to purchase the home at a set date for the present-day market price;
  • rent to own homes start with a lease of the residence;
  • There is a huge difference between rent-to-own homes and just renting any property;
  • Rent money is lost forever if one just rents, but a fraction of the rent in rent to own homes is utilized toward either the down payment or even the price;
  • The seller is not really the landlord in a rent to own homes situation;
  • The purchase price is agreed upon at the start of the lease;
  • Repairs are handled by the eventual buyer in rent to own homes situations;
  • The cost of rent might be a bit higher in rent to own homes arrangements than in simple rental scenarios;
  • is a great resource for those who search for rent to own homes.

Next: Pros and cons for home buyers