How to Arrange a Rent-to-Own

Arranging a rent-to-own agreement with your landlord may be the best option for a tenant who needs time to get to know the property or get their finances in order before making a purchase. In the agreement, the landlord gets paid higher than market rent payments as an incentive to give the tenant one, two or three years to purchase the property. The difference between the higher rent and market rent gets applied towards the tenant's "down payment" for the future purchase of the property.

How to Draw up Agreement

The best way to arrange a rent-to-own agreement is to amend an existing lease agreement. In the amendment, add a lease option clause which explains that the tenant has purchased an option to buy the property. It should include:

  • The length of the option
  • A record of any option fees paid (by the tenant)
  • Language explaining that extra rent payments, and the difference between premium and regular payments will be applied toward the purchase price of the home

If you don't have an existing lease agreement, then you can skip an amendment, and just make sure the lease option clause is added to the rental or lease agreement. Also, it's important to note that the landlord often gets to keep the "down payment" if you decide not to purchase the property when the lease option is up. They will also keep the option fee.

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