How to Rent to Own a Property
Rent to own, or lease to own, are arrangements where buyers have the option to purchase a rented property at a later date, at a pre-arranged price. According to CNN Money, rent to own deals are used by buyers to build up downpayments and improve credit, so that it's easier to obtain a mortgage. Rent to own deals have some distinct characteristics that separate them from renting and buying.
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Instructions
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Determine what the price will be to eventually buy the property. According to Jack M. Guttentag, a professor at the University of Pennsylvania, prices are agreed-upon ahead of time, and usually buyers have a short period, usually three years or less, to buy the property.
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Pay the option fee on the property. This fee gives the buyer the option to purchase the property at the agreed price in the future. According to Professor Jack M. Guttentag, this option fee is credited to the purchase price, and usually ranges from 1 to 5 percent of the property price.
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Pay the monthly rent and an additional rent premium. The additional rent payments are credited towards the purchase of the property in the future.
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Buy the property by the agreed-upon date by paying the balance owed. According to Professor Jack M. Guttentag, if you fail to exercise the purchase option, meaning you do not buy the property, then you will forfeit the option fee and rent premiums you have paid.
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