Rent-to-own risks, rewards

November 12, 2007, Inman Blog

Some home sellers are turning back the pages of an old playbook in offering to turn renters into buyers. The market slump has resurfaced contracts that can bring rental income to sellers and give renters the ability to work toward the purchase of the home they are renting.

These rent-to-own contracts, which are also known as lease with an option to buy or lease-option deals, typically allow prospective buyers to rent a property for a designated period of time while providing an option to purchase that property at a specific price, according to real estate columnist Ilyce R. Glink. Prospective buyers are typically asked to pay an option fee, and the deals can be structured so that this fee and a portion of the rent count toward the down payment in the purchase.