Rent to Own?

[darkling_glory]

We're in the process of renting out our condo. The new tenant expressed an interest in a rent to own scenario.

Can anyone explain to me how this would work? I get hung up on the logistics of it and can't figure it out.

Thanks!

[thedutchgirl]

It depends on your state's laws, so you would want to talk to a lawyer to draw up the papers. The general principal, however, is that you agree on a set price, interest rate, and monthly payments. A set portion of each payment goes to rent and another portion goes toward paying down the price you agreed on.

[darkling_glory]

So we would keep the mortgage in our name then? Indefinitely? That's where I get stuck.

[ejpint]

The way I've seen it proposed is the tenants pay a small downpayment to you (though not always). You agree upon the rental price, and a percentage of that is set aside toward the purchase of the home. At the end of the lease, they then purchase the home, or you may agree to extend the lease. If they walk at the end and don't purchase the house, well, then they've effectively just rented and you don't owe them anything.

Yes, the mortgage remains in your name until they buy the home. Just like if they were renting.

ETA: like pp said, you'd want to check with state laws, and I would use a real estate attorney to draft the agreement.

[boiler717]

We did a lease to purchase with our current home. We agreed on the purchase price, any contingencies (she actually waived financing, inspection, etc), and who would be responsible for closing costs (just like a standard purchase agreement for buying a house). She gave us a large lump sum of money up front ($7500). That is credited towards the purchase price when she exercises the purchase option. In addition, she is paying a monthly option fee of $100 that is credited towards the purchase price. In the event her rent is late, she still has to pay the option fee but it is not credited towards the purchase price. The rent is not credited towards the purchase price. She is also responsible for all repairs to the home during this time.

[boiler717]

Nov 1, 2012 8:26:11 GMT -5 darkling_glory said:

So we would keep the mortgage in our name then? Indefinitely? That's where I get stuck.

We have a set time frame listed in the contract that states when they must close on the house (meaning they have obtained financing and we do a title transfer). Then our mortgage will be paid off and we will no longer own the home.

[darkling_glory]

Thank you so much! This is exactly what I needed to hear. I really appreciate it.