Author Topic: Rent to own contract  (Read 1125 times)

historienne

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Rent to own contract
« on: May 04, 2016, 12:37:37 PM »
We are moving to a new city this summer, and our plan is to rent for a year before buying, mostly because we don't know the city all that well.  We are planning on renting in a specific neighborhood, which is walking distance from my new job, and we hope that we will like it enough to be comfortable buying there, but want the flexibility to change our minds if we don't love the location.

A friend who lives in that neighborhood just forwarded me a rental listing, which mentions that the property is also for sale.  The listing looks perfect for us - great location, good (rental) price, good condition.  If it's actually that nice when we see it in person, we'd like to broach the subject of a rental contract with a purchase option.  This could be perfect for us - we'd potentially get to rent for a year and then buy in the neighborhood without moving twice.  We have a toddler and another baby on the way, so avoiding a second move is something we'd value highly. 

My question is what a property owner might regard as acceptable terms for such a contract.  I know that often there's a monthly premium on the rent that converts to a down payment if the purchase contract is exercised.  We have plenty of cash for a down payment, so we don't need that kind of provision, but would be willing to pay a small premium for the purchase option - but how much is reasonable under these circumstances?  Ideally, we'd also like some flexibility on the timing of the exercise of the option.  If we live there for six months and love it, we'd rather go ahead and buy sooner, so that we can start paying our mortgage instead of rent.  Finally, I assume we'd negotiate the price of the property up front in this kind of lease - is that standard?

zephyr911

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Re: Rent to own contract
« Reply #1 on: May 04, 2016, 01:34:27 PM »
Realtor and rental investor here.

It can be done, and it can be a win-win. Everything is negotiable, and every seller is very different. Price could be preset, negotiable at time of purchase, or tied to any other criteria you can both agree on, but a fixed-price option to buy is the most advantageous to you, and is common enough that you should be able to get it.

If you think this is the best route, if you like the house enough to pay extra to reserve the option to buy, and if you can come to an agreement in principle, the next step would be to have a real estate attorney draw up a contract.

historienne

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Re: Rent to own contract
« Reply #2 on: May 06, 2016, 03:00:16 PM »
Thanks!  The owners haven't responded to our initial email, so this might all be moot anyway.