Rent-to-Buy
Following up from my article on Vendor/Owner Finance I thought it was relevant to discuss a variant of Vendor Finance commonly known as Rent-to-Buy, Rent2Buy, Lease2Buy and Lease-to-Own. With Rent-to-Buy the tenant of the property enters an agreement with the landlord/owner of the property to rent the property for a period of time with the option to purchase the property at a future date.
The tenant may or may not be required to pay a bond/deposit upfront to the owner for the option to purchase the property. The property price is determined up front and the owner is obligated to sell the property to the tenant at a future date for that price. Usually the tenant will pay the owner an extra amount of money with each rental payment which will accumulate with the initial deposit paid. If the tenant decides to purchase the property the deposit paid along with the accumulated extra payments with the rent will be deducted from the sale price. If the tenant doesn’t take up the option to purchase the property they lose the deposit and any extra payments made.