I've gotten several questions over the years about rent-to-own deals. It's important to understand conceptually what's going on in a lease-to-own situation.
Normally what happens is a buyer can't buy a property outright. Either they don't qualify, or they have other uses for their cash, or there is some other limitation preventing them from the buying the property in the first place. That's when they think, "Aha! I'll just rent-to-own. That way some of my rent will go towards a purchase."
And sometimes sellers think that's a great idea, too. Except almost always both of those sentiments are incorrect.
To peel this apart, let's start by seeing what's going on conceptually. The buyers are doing at least two and maybe three relevant things:
- Renting a house.