Renting to Own: 4 Ways to Get the Best Deal

Renting to Own: 4 Ways to Get the Best Deal

Although renting to own may sound like a relic of a bygone era, there are still plenty of people who end up buying their homes this way. The trick to getting a good deal is to make sure you understand everything about the agreement and the property before you tie yourself to it. If you think rent-to-own properties might be right for you, these tips will help you protect your interests.

1. Check Out the Home Thoroughly

Many buyers like the concept of rent-to-own because it gives them a chance to try out the property before they buy it. Think of how many property owners bought homes with only a few hours of looking first.

While renting before you buy a home does allow you to get a sense for the home and the property, you should try to get a deeper understanding of any of its quirks. Like any other home buyer, you need to request a home inspection before you agree to a contract. This will tell you if the home has the potential to be a good investment right now, as well as in a few years.

2. Get a Detailed Lease Option Contract

Rental contracts and home purchases tend to be quite meticulous. The paperwork for a rent-to-own home, called a “lease option contract,” should be equally precise. In the lease option, you will see the term of the rental and how much you will be expected to pay monthly for rent, plus extra for a down payment. The contract should state that you have exclusive access to buy the home during the specified term.

You can negotiate with the owner who will pay for services and upkeep, and the division needs to be clearly delineated in the contract. The lease option paperwork will also identify a plan to establish a sale price for the home, make note of any existing liens on the home, and set terms for an exit clause if needed.

3. Secure a Good Price in a Growing Market

Probably the biggest benefit to a rent-to-own situation is that you can set a sale price in advance. Homes in most areas will appreciate at least a little over a five-year period – in a great, growing area, you may see even more growth in that time. If comparable properties in the area appreciate by $25,000 in that time, you may save a lot of money. Schedule an appraisal to confirm a fair value for the home, and take note of the amount of any liens (e.g. a mortgage) on the property. The last thing you want is to battle with the mortgage holder over the sale price when it comes time to buy.

4. Be Sure of Your Future Plans

Going into a formal rent-to-own arrangement may seem very low-risk, but it does have potential disadvantages. If you decide not to buy the home, you are not forced to do so. However, you will almost certainly lose the earnest money you paid on top of rent to serve as a down payment. It may be worth it to bail on the purchase if the home has lost a lot of value or you realize that the property is completely inappropriate for your current needs.

Invest the time at the beginning to eliminate as much future uncertainty as possible prior to signing. That way, you will be less likely to find yourself stuck in a losing proposition.

Renting a property before you buy can sometimes be an excellent future investment. If you follow these tips, you can avoid frustration and get a better deal on your dream home.

Espana Gomez is an author of this blog. Recently she works as an interior design assistant in her town. She loves daydreaming about beautiful homes and interior decor.