I've had one work out.  Out of MANY attempts.  They're a disaster waiting to happen.  Too many pitfalls between buyer, seller, and the marketplace and more often than not, these things go down in flames.

When they do work out though, it's a beautiful thing --- it's just tough and you need to make sure the buyer & seller are honorable people, AND cover EVERYTHING in writing up front regarding tenancy, repairs on things that break, market fluctuations, buyer failure to perform, etc.

Steer clear.  In fact run as far away as you can.  In thirty years I have not heard of one that has worked out.  

Rent to own almost never works. Best to choose to rent until you're ready to buy. If you plan on selling to a friend or relative in the future, you can set a sale price at beginning of lease, and sellers can agree to give tenant $100.00 from each months rent to help pay closing costs if sale does actually happen. A Lease-Purchase agreement is a better name for it which binds the parties to complete the sale at a future date.

I haven't heard from anyone that has done one, or more, that it worked. Doesn't mean it can't, depending on how the legal agreement is structured. Could be a problem in a market where prices are changing

None that I am aware of.  I have written up a deal or three in my time and only one has worked out.  They are still in the house, and they still want to live there, they pay their rent on time.

Ari Taylor I've written about this many times on other forums. It's the illusion of ownership that rarely if ever results in the renter/buyer completing the transaction. In the vast majority of cases the buyer doesn't qualify for financing when the purchase option comes due and ends up worse off than when they started. 

It can be lucrative for a landlord/seller who has no conscience.  They collect over market rent, put the burden of maintenance and repairs on the renter/buyer and get to keep the purchase option deposit.  

The pros are allowing credit repair time while the buyer rents the house and in some situations the seller gives credit against the sale price to the buyer for part of the rent payments. It benefits the seller to get that front end deposit and also to have someone in the house paying utilities, cutting the grass and paying rent.

Terms usually favor the Seller !

Credit score will always be the hurdle. Some won't qualify - but then I have rentals that won't take someone with a low credit score either.

Always has been a better deal for the landlord vs the tenant. Tenant never saves the down in time & looses their option money. 

Why bother with it to me it's either or. It doesn't make you a better grade of tenant.

Ari,

Not sure if this a good thing.  I agree with Debbie Holmes .  The few times I checked it out, it did not make sense.  A

They usually only work well for the sellers if the property doesn't get destroyed - my suggestion is speak with a local real estate attorney in your area they can give you the low down

You do not want to be involve unless you have a lawyer write it up in our state.

In Louisiana we have what we call "bond for deed"

I did a couple of posts on it!

Bond for Deed Info for Buyers

Have not had any experiece with rent-to-own Ari Taylor 

Regardless of how low a downpayment there may be, there are buyers who simply won't qualify for a loan. So as a seller do you want to hold up your home's sale hoping against hope that one day that tenant will qualify? I have a listing coming on now, where after 8 years tenants did not qualify, trashed the home--$30K of repairs for what was a move-in home 8 years ago, and a law suit in the works.

The typical result is no deal.

Ari Taylor - I have never done it. However, if you want to, get all the terms and conditions written down - and work with attorney to make sure  there is no escape for tenant/buyer.

bad idea

Rent to own isn't done in my market. At least not that I've ever seen. We do sometimes have owner carry situations come up, but the seller will only carry the note for a few years, and this works for buyers with less than perfect credit. 

Ari Taylor There are two options. One is a Rent with Option and the other is a Lease Purchase.

Rent with option gives a tenant the right to purchase a property after a specified period, If the tenant doesn't exercise the option the tenant will lose their option money which is usually in the form of additional rent money.

A Lease Purchase is where a buyer writes an offer on a property and pays rent which is usually equal to a monthly mortgage payment. With this type of arrangement, the buyer is committed to purchasing the property as specified in the contract. Walking away would be a breach of contract. This is really a delayed closing. Sometimes a buyer may negotiate a credit of a portion of the rent to be applied towards their downpayment.

Everything is negotiable and can make a deal work.

Basically a seller finance with many not it being a public record like a land contract, the advantage is that it is harder for liens to be attached to the property that will have to be removed if the seller needs to take it back.

Of course everyone is different depending on the agreed upon terms of the deal.

I get requests for them often, but have never found a tenant that was qualified.

There many ways to skin the Real Estate cat...this be one of them.

They are for buyers with poor credit or owners with bad homes.  It is very rare that a rent to own is a good idea for the tennant.  The rent is usually high with very little going toward prinipal.  It is much more common in a down market.  Some owners are banking on the fact that the renters will never convert to buyers and they can start again.

Depends on the situation.

They are working on their credit and will be ready soon? Hmmm... IDK

Trailing spouse income needed to qualify? Spouse is a teacher and will start in the fall? Hmmmm.... Ok, we can explore this. 

I have never completed a rent(or lease)-to-own transaction and have no plans to pursue one either.  

They aren't very popular out here.  I can't think of any that even offer it out here.  Personally, I'm not a fan of the concept and I really don't understand it either.

A disaster for the purchaser most often and a money maker for the seller! Not a real option!

It is a great product if it is done correctly. However, it may not be a good time since prices are at the top of the market. What happens when home does not appraise for set price?

No pros whatsoever! The 'buyers' end up paying a higher price, finance at a higher rate and have little recourse to prevent eviction if they are late, or miss a payment.

i do not recommend

Actually, that is how I bought my house many years ago.  It was a little complicated - an offer to purchase at a set price with a pre-settlement occupancy agreement at above market rent.  If we settled, we got a big chunk of the rent back.  If we had decided to bail, the seller would have gotten way above market rent (it had been a rental property before).  We settled, and during the six month interim, prices had gone up a bunch.  And our down payment and closing costs were taken care of by the credit on the rent, which had been placed into our earnest money escrow account at the beginning of each month.

This is just one of a bunch of different ways of doing it. 

It's just another way for the Buyer to save up enough money to have for the down payment when they are ready to purchase the home.  Part of the rent is put aside for that purpose.

If the home prices are dropping the landlord does not mind to sign a rent to own option. Right now home prices are going up, landlord has no problem to sell it at market (higher) and will unlikely want to sign a contract.

In fact. many landlords want to get rid of existing tenants to get top rent. So it does not make sense to sign on tenants to entice them with home ownership.

The advantage is commission free and no repairs are needed. The tenants know everything.