Rent-to-own homes are not given the respect they deserve in the real estate community. There’s an entire population of buyers that don’t see these lease-to-own homes for what they really are: a viable, alternative method for financing a real estate asset.
What Is Rent-To-Own? Rent-To-Own is as an alternative financing option for today’s buyers. Traditionally, home purchases have followed a “predictable” path: buyers secure funding from a bank, they submit an offer on a home, they meet with the seller to exchange funds, and — before they know it — the deal is closed. Of course, there are several additional steps that would accompany a traditional purchase, but that’s not my point. The real takeaway is that homes are typically purchased via a loan from a bank. What rent-to-own intends to do, or already has, is disrupt the way people finance homes.
As the phrase already lends itself to, rent-to-own is exactly what you would assume it is: an opportunity to rent a home until you have made enough payments to take over ownership. Otherwise known as a lease option, when buyers enter into a rent-to-own agreement, they are effectively agreeing to rent a subject property for a predetermined amount of time until they are able to exercise an option to purchase the house from the original owner.
More specifically, however, rent-to-own contracts will typically have prospective buyers pay rent for a set amount of time (upwards of three years), after which they will be given the option to purchase the home. Of course, there are additional terms and conditions that must be met, but that’s the main idea: the home is rented out until the “renter” can exercise a purchase option in the future. That’s an important distinction to make, as the agreement usually gives the renter the option to buy the home in the future. As Investopedia is quick to point out, “some contracts (lease-option contracts) give the potential buyer the right but not the obligation to purchase when the lease expires. If he or she decides not to purchase the property at the end of the lease, the option simply expires.”
See original article at: https://www.fortunebuilders.com/rent-to-own-homes/