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Homebuyers typically need a home loan, or mortgage, to purchase a new home. A good credit score and a decent cash reserve for a down payment are also necessary. However, there is an alternative, less-known option available to most buyers: a rent-to-own contract.
A rent-to-own agreement gives you the option of living in the property as a tenant with the option to buy it before the lease term expires.
Let’s weigh some of the pros and cons of a rent-to-own agreement.
The rent to own contract is executed by and between the parties:
Landlord’s name [Property’s Address]
Tenant/buyer’s name [ Current Address]
Whereas, description of a property located at [ address] is as following:
Description( total area, covered area, parking space, title number, etc.)
Whereas the tenant and landlord desires to lease the property mentioned above
Whereas the tenant desires to buy the property under the conditions given herein by the landlord for the tenant to purchase the property.
Therefore, in consideration of the obligations contained here, the parties agreed to the following:
The landlord agrees to lease the property to the tenant on [date].
The landlord agrees to lease the property at an amount of [monthly rent ] and shall continue on a month-to-month basis which shall be paid at [landlord’s address].
Utilities and other bills of operation and maintenance are in the scope of the tenant.
The tenant shall pay a refundable one-time amount of [dollar amount] for the term of the lease, which can be used to maintain any damage caused by the tenant during the term of the lease. Upon termination of a lease, the landlord shall return the security deposit within but not more than 45 days.
No structural changes or modifications can be made without prior permission of the landlord.
Tenants cannot keep flammable, dangerous, or toxic material that jeopardizes the community’s safety.
In this agreement, the landlord offers the tenant an option to buy the property for the total price of [ total price] subject to the following conditions:
The period to buy the property starts on [date] and ends on [date]
The landlord shall refund a security deposit to the tenant within or no more than 45 days from the day lease expires.
Regular maintenance of wear and tear during the lease duration is the responsibility of the tenant.
In consideration of the purchasing option, the tenant agrees to pay a non-refundable [amount] to the landlord at any time during purchase period time. The amount shall be adjusted in the purchase amount of the property.
If a tenant does not exercise the right to purchase the property, the lease of the property shall remain intact, and the property is returned to the landlord upon expiry of the lease.
The right to purchase the property is an exclusive and non-transferable option. Only the tenant herein the agreement can exercise the right.
The agreement shall be interpreted, governed, and construed according to the legal system of [name of state].
A rent-to-own agreement allows tenants the opportunity to save money towards purchasing a home of their own. It also affords them time to improve their credit score before applying for a home loan. Always consult with a real estate agent or attorney before signing a rent-to-own agreement.