Is Rent to Own a Good Idea?

Real estate rent-to-own agreements, also known as lease purchase options, have long been an option for home buyers with poor credit or those lacking down payment funds. In a rent-to-own agreement, the homeowner agrees to lock in a purchase price for a specific time frame. The buyer pays an option fee, and a portion of the monthly rent is applied to the purchase of the home, either as a down payment or as a credit towards the total price.

Home Buyer Situation - Good Idea

Entering into a rent to own contract can be a good idea in several situations. For example, if the reasoning is to postpone a purchase until pending legal matters, such as divorce, are resolved, a rent-to-own agreement can be a good option. Such an agreement can also be advantageous for individuals who are waiting for an annual bonus or inheritance, those who want to lock in the purchase of a highly desirable home until the sale of a previous residence is completed, or or buyers who simply want to ensure that they are happy with the location.

Home Buyer Situation - Bad Idea

Taking on the responsibility of a rent-to-own agreement can also be a bad choice for many reasons. A home buyer with poor credit who anticipates an improvement in his situation may find himself at the end of a contract without financing. This can often mean the loss of fees or deposits that were to be applied to the purchase price. Additionally, you should not use a rent-to-own agreement if you are unsure about your long-term interest in the home.


If properly constructed and worded, a rent-to-own agreement is a legally binding agreement. This is dependent on how the contract is structured and executed. In some cases, rent-to-own agreements are informal agreements between buyers and sellers. These situations often lead to disagreements over terms and may not be binding if they were not properly recorded or executed. A lawyer or real estate professional should examine any rent-to-own contract before you sign it.

Buyer Obligations

Rent-to-own contracts may contain certain obligations on the buyer, such as prompt payment of monthly rent, responsibility for home maintenance or a deadline to obtain bank financing for the purchase. Many of these clauses can be used to cancel the contract and leave the buyer without recourse. Avoid contracts with extensive or elaborate clauses or obligations.