Blog > Rent to Own - How It Works
Rent-to-Own Homes: The Real Numbers Behind the Deal
Rent-to-own is one of those ideas that sounds like a dream: move into a home today, work toward ownership tomorrow. But like anything in real estate, the fine print makes all the difference. Let’s break it down so you know exactly what’s on the table.
The Basics of Rent-to-Own
A rent-to-own agreement is part rental, part purchase contract. You agree on a future purchase price today, then pay rent plus an additional amount each month that builds toward your down payment. At the end of the term, you have two choices:
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Buy the home at the agreed-upon price.
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Walk away and use your down payment credits toward another property.
Here’s the key part: those credits must be kept safe in a trust account or joint account. That way, you don’t lose your hard-earned money if something changes.
How Price Growth Works
Most rent-to-own agreements build in a price increase. It’s usually about 5% per year until the end of the term. So while you lock in today’s market, you’re also paying for the time it takes to get mortgage-ready.
Private Rent-to-Own vs. Company Rent-to-Own
There are two common ways these deals get structured: directly with a landlord/seller, or through a rent-to-own company.
| Feature | Private Rent-to-Own | Company Rent-to-Own |
|---|---|---|
| Who owns the home during the term | Landlord or seller | The company buys the home in their name |
| Purchase price | Negotiated at the start, usually with 5% annual increase | Company sets a higher starting price (ex: $310,000 on a $300,000 home) plus 5% increase per year |
| Down payment credits | Extra rent goes into a trust/joint account | Same, but controlled by the company |
| End-of-term options | Buy at the escalated price or walk with your credits | Buy at escalated price or walk with your credits |
| Flexibility | More negotiable | Less negotiable, company rules apply |
| Cost | Generally lower | Generally higher, you pay for the structure and guidance |
The Numbers in Action
Let’s put real numbers to it. Imagine a $300,000 home with a 3-year rent-to-own term.
| Year | Private Rent-to-Own (5% increase) | Company Rent-to-Own (starts at $310,000 +5% per year) |
|---|---|---|
| Year 1 | $315,000 | $325,500 |
| Year 2 | $330,750 | $341,775 |
| Year 3 | $347,287 | $358,863 |
End of term purchase price:
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Private deal = $347,287
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Company deal = $358,863
That’s a difference of $11,576 over three years.
Key Takeaways
Rent-to-own can be a great path to homeownership, but you need to know the numbers going in:
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Always confirm your down payment credits are in a trust/joint account.
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Understand the yearly price increase—it’s not just about today’s price.
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Know the difference between private vs. company deals so you aren’t blindsided by extra costs.
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And above all—get a real estate lawyer to review the paperwork.
Rent-to-own isn’t for everyone, but for the right person at the right time, it can turn the dream of ownership into a plan you can actually stick to.
Rick Mooney | REALTOR®
eXp Realty Brokerage
(705) 542-4685