Rent to Own Your Home

Renting to Own your own home is a dream for many tenants. It’s not a mystery and, for most tenants, it’s doable with a little planning. And, with any contract, it’s a good idea to get legal advice before you sign something.

The basic agreement is what’s usually known as a “Lease-Option”; that is, you have a Lease for the current use of the property and an Option to purchase it at a later date at a set price. The tricky part is setting the price now for the future purchase.


One way to look at this is to ask who’s risking what? Essentially, a Lease Option is a bet. In a Lease-Option, Landlords are betting that the market will go stay the same or go down in the future, and that by setting the price now, they will get more money than they would if they sold the house later. Tenants are betting the opposite: that, in the term of the agreement, the market will go up and that they’d have to pay more for the same house later on than if they get the price locked in now.


Leases are about setting the price of the use of the property for a determined period of time, and paying that amount in monthly installments, starting with the first month and ending with the last month of the lease. A Lease-Option is that and more: the most common variation that I’ve seen in nearly 20 years as an Attorney and Real Estate Broker is an add-on arrangement that, in broad terms, (1) sets the price for the future sale of the property; and (2) sets the date for the purchase to take place; and (3) determines the downpayment, which is then usually divided into monthly installments over the life of the lease that are then added on to the rent paid now. Is it more complicated than that? Yes, and this article is only an outline to get you started.


Before you enter into a Lease (or any other contract), you need to think about what you want and what you are willing to pay (i.e., risk) to get what you want. A simple way to start is to make a chart for yourself to help you see what you want. Take a blank piece of paper. Draw a line across the top of the paper so that you can write a few lines above it; then draw a vertical line down the center of the page. On the top left side, write; ” what” and the top right side, write: “how much.” In the column under ‘what’, start making notes about where you want to live; what kind of house you’d like to buy; what features you’d like to have and so on. On the right column under “how much”; either write in how much money you’d be willing to spend today for that or, if you don’t know right now, simply put in ‘$” for the minimum you’d spend and $$ or more $$$$’s if you’d be willing to spend more for that. You get the idea. Then, go back and number down the left side of the page the items you’ve listed in the order of their importance to you. The point of this very simple exercise is for what you want to appear to you, even if you hadn’t really thought about it that way before.


So, once you know what you want, you can begin to bargain for it, knowing that the more important it is to you, generally speaking, the more you’re going to be willing to pay for it. Another thing to know is, even though you may have a verbal agreement with your landlord based on your being a “month to month tenant” without a current lease, any agreement that will last longer than a year will have to be in writing to be enforceable in court if anything goes wrong. All investments – whether it’s a lease, or an agreement to buy, or stocks etc. – have an element of risk which is why you need to get it all in writing before you sign anything or spend any money.


How and for how much you set the price is between you and the landlord/seller based on many factors including how much risk each side wants to take. There are many methods to determining price. The internet is a wonderful resource tool plus a competent local Realtor can help you by explaining what the current prices to similar properties are and why knowing what the “comparables” are is important to you in setting the purchase price.


Getting what you want means that you know what you want and what you don’t want. Getting what you want your way means having control over what you agree to. No one can – or should – do that for you. It’s your money.

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