What is Rent-to-Own Anyway?

Rent-to-own (also called lease-to-own) is like renting a house, but with a twist! Part of your rent each month actually goes towards eventually buying the house. It’s like saving up a little bit at a time, while already living in the place you want to own.

How Does It Work?

Here’s the basic idea:

* **The Agreement:** You sign a contract with the homeowner. This contract says you’ll rent the house for a certain amount of time (usually 1-3 years).
* **Rent Payments:** You pay rent each month, just like you normally would. But a portion of that rent is set aside.
* **Option Fee:** You might have to pay a small, one-time fee upfront called an option fee. This gives you the *option* (but not the obligation) to buy the house later.
* **Purchase Price:** The contract will also say how much the house will cost when you *do* decide to buy it. Sometimes, this price is fixed (stays the same), and other times it can change depending on the market.
* **Buying Time:** At the end of the rental period, you can either buy the house (using the money you saved from your rent payments) or walk away. If you walk away, you usually don’t get that saved money back.

Looking at Rent-to-Own Properties in the Denver Area

Let’s imagine some possible rent-to-own situations around Denver. Remember, these are just examples, and you’d need to check with a realtor or a landlord to confirm any real rent-to-own availability.

Example 1: 10062 Southlawn Circle, Commerce City, CO 80022

Let’s imagine that the home at 10062 Southlawn Circle, Commerce City, CO 80022 is available for rent-to-own. Commerce City is a growing area near Denver.

What Might a Rent-to-Own Deal Look Like?

* **Monthly Rent:** Let’s say the monthly rent is $2,500.
* **Rent Credit:** Maybe $500 of that rent goes towards the future purchase.
* **Option Fee:** Perhaps there’s a $5,000 option fee.
* **Purchase Price:** The agreed-upon price to buy the house in two years is $450,000.

If you rented this for two years, you would have saved $12,000 ($500/month x 24 months) towards buying the house. You would still need a mortgage for the remaining amount ($450,000 – $12,000 = $438,000).

Example 2: 5157 Goshawk (City/Town Varies – Could Be Denver or a Suburb)

5157 Goshawk is another address we’ll consider. Because there may be many houses with the name on the street, and we do not have the city or town, we are considering the possibilities.

What Might a Rent-to-Own Deal Look Like?

* **Monthly Rent:** Let’s say the monthly rent is $3,000.
* **Rent Credit:** Maybe $600 of that rent goes towards the future purchase.
* **Option Fee:** Perhaps there’s a $6,000 option fee.
* **Purchase Price:** The agreed-upon price to buy the house in two years is $500,000.

If you rented this for two years, you would have saved $14,400 ($600/month x 24 months) towards buying the house. You would still need a mortgage for the remaining amount ($500,000 – $14,400 = $485,600).

Is Rent-to-Own Right for You?

Rent-to-own can be a good choice if:

* **You Can’t Get a Mortgage Right Now:** Maybe your credit isn’t perfect, or you haven’t saved enough for a down payment.
* **You Want to Try Before You Buy:** You get to live in the house and see if you really like it before committing to buying it.
* **You Need Time to Save:** The rent credits help you save for a down payment.

However, it’s also important to know the risks:

* **You Could Lose Your Money:** If you don’t buy the house at the end of the rental period, you usually don’t get your rent credits back.
* **The House Might Lose Value:** If the market changes, the house might be worth less than the agreed-upon purchase price.
* **The Landlord Could Default:** If the *landlord* doesn’t pay their mortgage, you could lose the house, even if you’ve been paying rent.

Important Things to Consider Before You Dive In

Before you sign a rent-to-own agreement, it’s smart to:

* **Get Legal Advice:** Have a lawyer review the contract to make sure it’s fair.
* **Inspect the House:** Get a professional inspection to make sure there are no hidden problems.
* **Understand the Market:** Research the value of similar homes in the area to see if the purchase price is reasonable.