What is Rent to Own in Real Estate - While rent-to-own transactions are most commonly conducted in the context of consumer goods obtained at a retail store, this type of transaction also describes a specialized real estate agreement.
In a rent-to-own real estate agreement, the tenant has the option to purchase the real property at a fixed price within a specific period of time, usually one to three years. As part of the contract, the renter may be required to make a nonrefundable deposit. Occasionally, a portion of the monthly rent paid during the lease period is counted towards the down payment on the property, often in addition to the monthly rent as a monthly premium that sets the rent above the current market rate.
If the tenant is unable to exercise the option to buy, the owner is then free to rent or sell the property to another buyer, or to restructure the contract. Rent-to-own real estate contracts typically become more frequently exercised during housing market downturns, such as the late 2000s financial crisis.
