Are Rent to Own Homes Even Real? Here Are Stories From 5 People Who’ve Done It

If you’ve heard of rent-to-own homes but haven’t given them much thought, you’d be forgiven for assuming that there must be a huge catch to make the whole thing work.

Or, maybe the idea sounds so far-fetched you wonder if rent-to-own homes are even real in the first place — totally fair!

But renting-to-own is a real and valid path to homeownership, so we talked to five people who’ve done it — either from the buying or selling side — to learn more. This includes perspective from Margaret Labus, a real estate agent in the Lake Geneva, Wisconsin, area, who has 20 years of industry experience.

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Before we get into the stories, let’s start with a brief primer on the business of renting-to-own (RTO).

RTO 101: An introduction to rent-to-own homes

As we’ve already introduced, yes, rent-to-own homes are real. It’s a perfectly legal way to buy or sell a house — and creates a unique scenario that requires extra patience and understanding from both sides.

“It’s not terribly common to rent-to-own because most of the people who are in the rental situation are those who, for whatever reason, can’t get financing the conventional way through a bank,” explains Labus. “But, it does open some possibilities with the right seller.”

These possibilities can be stipulated in the rent-to-own agreement — which is also sometimes referred to as lease-purchase, or a lease-option agreement.

The main difference is that with a lease-option, a tenant has the — you guessed it — option to buy the home at the end of their lease term. With a rent-to-own or a lease-purchase agreement, however, the tenant has already agreed to buy the home after a specified period.

Renting-to-own isn’t for everyone, and it’s definitely not something you should go into without doing your research. But if you’ve found a home you love and you just need a little more time to get your credit in order or save up a down payment, a rent-to-own agreement could be your literal foot in the door.

The only thing is, the seller generally also has to see a benefit in the agreement; otherwise, they may as well just sell the home outright — but this isn’t always the case.

1. Renting-to-own as an act of goodwill

Though it’s true that most sellers would rather finalize the transaction as quickly as possible once they’ve accepted a purchase offer, not everyone is in a hurry to relocate or collect equity.

“One investor I work with works solely in the rent-to-own arena because they have it as their mission to supply good and fair housing to people who don’t have the means to purchase right now,” says Labus.

Her investor client believes that everyone deserves to live in a place they can be proud of and be treated with dignity.

“With each house purchased by this investor, there’s an express goal to renovate and build out a home nicely, then turn it around and have it available for a tenant to rent-to-own,” Labus explains.

Labus’ investor client maintains around 50 homes in their area and is happy to accommodate a tenant’s request to move to another part of town — effectively transferring their rent-to-own agreement as needed.

“It’s not every investor who works like this, but this person has deep roots in the area, and they’re emotionally committed to the success of our communities.”

2. A lease-purchase on a dream home

Homeowner Jeff Johnson bought his Maryland home through a lease-purchase agreement. The flexibility of this arrangement made possible a purchase he was not yet in a position to otherwise pursue.

“I opted for a lease-purchase agreement because this was my dream home,” says Johnson. “I didn’t have enough finances at the time, and the lease-purchase agreement allowed me to save some money for the down payment.”

Since one caveat of rent-to-own homes is that property values are likely to change during the term of the agreement — which could extend from one to five years — the buyer and seller must determine a sales price that feels fair to both parties.

“The price I agreed to was slightly higher than market value at the time of purchase, and that’s because the lease agreement was for three years,” explains Johnson. “The property value would obviously rise during that time, so it seemed like a fair deal to me.”

In Johnson’s case, both parties successfully upheld their ends of the bargain, and he paid the agreed-upon price at the end of his three-year lease term.

“Rent-to-own seemed like a great option to me because I was in a financial rut. This allowed me to save some cash for a down payment, pay all the bills on time, and improve my credit score — all while living in my dream home that I’d eventually get to buy.”

Johnson admits that there was one unexpected challenge with renting to own, and that was property maintenance.

“I had to take care of the repairs on my own,” he says. “This is usually the landlord’s responsibility, so I was a little surprised when I had to pay for all of the maintenance.”

So it’s no surprise that Johnson’s advice to prospective rent-to-own tenants is to ensure that maintenance and repair requirements are clearly outlined in the contract to avoid unpleasant surprises (or potentially biting off more than you can chew).

3. A rent-to-own with an option to buy

Keith Sant bought his home in Columbus, Georgia, following a five-year rental agreement with an option to purchase.

“While signing, the price we agreed upon was $230,500, and 20% of my rent went toward the down payment,” says Sant.

He was grateful for the opportunity to save money and improve his credit score while living in a house he’d already locked in at a fair purchase price. Five years is a long time in the real estate world, and Sant acknowledges that interest rates did fluctuate while he was renting — but those ups and downs didn’t negatively influence his decision to buy.

“Since the purchase price was decided on the agreement while signing, that didn’t change,” he says.

Sant had been searching for a home for eight months before finding the one he ended up renting to own. And, knowing he could lose money if he chose not to exercise his purchase option, he didn’t take the decision lightly.

“I weighed the pros and cons of renting-to-own from a buyer’s point of view, and eventually, I decided to go with the deal,” Sant explains.

“Rent-to-own can be a good idea for buyers who are unable to qualify for a mortgage — instead of putting up a heavy down payment before moving in, you can build equity in the house over a period of time.”

For anyone considering a rent-to-own home, Sant recommends thoroughly researching the seller.

“Check the credit report of the seller for any red flags. Obtain a title report to see how long the seller has owned the property — the longer they’ve owned the property, the more equity they have.”

Even if you have a few years of renting ahead of you, if you’re potentially going to buy the property, don’t skip your due diligence before signing an agreement. Have a home inspection completed, order a title search, and — we can’t stress this enough — get everything in writing between you and the seller.