A Rent to Own contract or agreement, also known as a Lease with Option to Purchase, gives buyers a chance to rent a home and buy it at a later date. Use a Rent to Own Agreement document if you want to lease a dwelling unit and are interested in selling the property to the tenant if they’re interested or if you own a property that will be leased to a specific tenant.
How it Works
A Rent to Own Agreement is a great option for someone almost ready to buy. It gives them the opportunity to buy the property they’re renting before their actual lease ends. It is great for sellers too who can’t find a buyer immediately. It works for the buyer to give them time to repair their credit history or to save for a down payment. The rent to own agreement is similar to a standard lease agreement with details on due date for rent, the amount, who is responsible for utilities, etc. The agreement also goes into details on the purchase price of the home, how long they have till they can purchase and the percentage of the rent that will be applied to the down payment of this property. In many cases, the tenant will be responsible to make repairs to the rental property in this type of arrangement. The tenant themselves during this time period should order an appraisal to make sure that the future purchase price of the home is agreed upon.
This arrangement is great for a seller who has limited cash flow and wants some money now that will be applied later to the overall cost. It also has tax advantages as opposed to one lump sum payment for the sale of this property listed in the agreement. While the landlord is contractually obligated to sell the home to the tenant, the tenant themselves is not obligated to purchase it. This will hold up the selling process for the landlord if the tenant backs out of the purchase.
This is also known as a Rent to Own Agreement, Rent to Own Lease Agreement and Rent to Own Agreement Form.