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Is a Rent-to-Own Property Right for You?

Rent-to-own programs have their benefits and drawbacks. Here's what you need to know.

[Updated: Jun 08, 2021 ] Feb 28, 2020 by Maurie Backman

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Benefits Drawbacks

• Possibly avoiding missing out on a property you'd like to buy but can't right now.

• Part of your rent goes toward your down payment, providing a long-term benefit you don't get with standard rent and forcing you to save.

• With the option to buy, you get to determine whether a certain home and area are right for you before committing long term.

• Likely to have a much higher monthly payment. Losing your option fee if you don't end up buying.

• Facing steep penalties if you choose not to buy after entering into a lease-purchase agreement rather than having the option to buy.

• Possibly being responsible for maintenance and property taxes before becoming eligible for tax breaks as the owner.

• Facing the risk that the home could be worth much less by the time you’re ready to buy.

Benefits Drawbacks

• Likelihood of higher-quality tenants than in a traditional rental.

• May help in finding a buyer if you're having trouble selling.

• May get to share maintenance and tax responsibilities with the tenant, depending on the contract, unlike in a traditional rental.

• Will have benefited from higher-than-average rent even if the tenant doesn't buy.

• Keeping the option fee if the tenant doesn't buy, possibly using it toward home improvement and marketing.

• Possibly having to re-list the home for less if the tenant doesn't buy and the value drops.

• Still having to at least share in the expense of maintenance and taxes during the lease period, unlike in a traditional sale.

• Having to play landlord for a few years before you can officially unload your home.

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