When it comes to the real estate market, nothing is ever just black or white. There are always some shades of grey. One of these shades of grey is in the rent to own option. If you are looking into renting a condo there is the possibility that you can choose a contract where you 'rent to own.' Similar to a rent-to-own or lease-to-own car lease, you are gradually making the money to put down a down payment on your rented condo so that, one day down the road, it will be yours to own.

As a condo owner, the rent to own option can also benefit you. If you are having trouble selling your home, your current renter may be happy to choose the 'rent to own' option which means you do not have to put your home on the market and your renter doesn't need to find a new place to live. Make sure you understand the terms and conditions involved in any rent-to-own agreement so that both parties are completely happy with the procedure and the conditions.

Rent to Own Condo Agreement

A rent to own option requires a lot of paperwork. The sale price must be agreed upon and the option fee and rent premium must be worked out after agreeing upon a lease length. With a rent to own agreement, some of the monthly rent will go towards the monthly rent check while the rest will go towards a down payment on the house. For example, perhaps you will pay $1000 per month, $800 of which will be rent and $200 which will be used for a down payment later on. Typically the monthly rent will be higher than if it was a regular rental property but it also acts as a savings account for the renter/potential owner. After a certain amount of time, usually a period of three years, the renter will be able to pay the down payment of the condo and 'buy it.'

Rent to Own Considerations

As a condo owner one of the things you need to consider is your selling price. Because most rent-to-own agreements are in place for three years there is a chance you could sell your condo for much less than it will be worth in three years time. Or, alternatively, if the market drops, you could be walking away with more than you can expect. As part of the rent-to-own agreement you are locked into the contract and thus cannot back out if a better opportunity and price comes along.

As a renter, the rent to own option is a great alternative to getting a loan from the bank, especially if you have poor credit and have been denied already. It allows you to work towards the goal of owning the condo and offers you an affordable way to save each month for the down payment. However, as the potential owner of the condo, you will inevitably be responsible for complete upkeep of the home as well as paying the rates and contributing to the master HOA policy.

In a rent-to-own agreement, renters do have the opportunity to back out of the deal before the three years or contract time is up; however, you will lose your option fee as part of the agreement. The option fee is generally around $5000 but again, this is something that needs to be worked out with the condo owner, the potential buyer and a real estate lawyer. Make sure you understand the rules, regulations, terms and conditions of any rent to own option before committing yourself to it. This is important for all parties involved.

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