It's not a terrible idea, I've heard of toy lending libraries before (usually though a library or community center though). My issue with it is that it could become expensive, and time consuming very fast.
Assuming you can establish a market for this:
-There's a huge start up cost, most toys folks would want to rent are either expensive, or in such demand that you would need quite a few of them to not drive people away because you don't have the toy they want.
-Where are you storing your inventory? I would bet most toys people want are on the larger size (doll house size) rather than smaller items (which would get lost anyway)
-How will you make sure everything's clean? UV Sterilization? Disinfectant? You personally might not care but you don't really want to be the one responsible for a flu, strep, pink eye, diarrhea, etc. outbreak because of one kid.
-What recourse will you take if you find that a toy is missing pieces, is broken, or is lost? A cheap toy or an inconsequential component lost might lead you to discount it but how will you recover the cost if someone loses it?
-How will people know what your current inventory is? Maintaining a website with pictures, etc. can cost a bit and be time consuming.
-What about toys that fall out of favor? Will you donate them? Sell them at a steep discount?
-How will you advertise your business?
Sorry to poke holes in your idea. I like it and it could be profitable in certain markets, but I see it as a lot of work.
FWIW I could see myself using it in the future. Outdoor toys, nicer stuff (melissa and doug), hot wheels tracks, puzzles, video game equipment would be some of the things I could see myself renting.