Renting vs. Leasing-to-Own

March 2, 2009 9:38 AM

Posting for a friend: My wife and I are moving from BFE Oregon to Lexington, KY. We sold our little house in Oregon without losing any money, but we aren't looking to buy a house in Lexington just yet since we don't know much about the market or where we'd like to live. We have noticed that a lot of property agents rent single family homes, but also offer lease-to-own agreements on new(er) homes. Some of these homes are pretty nice, new, and seem to be in decent areas (we're flying out to see prospective rentals, so we'll be able to see anything before an agreement). Has anyone ever been in a lease-to-own agreement for a house? Is there any advantage to leasing a house like this, instead of just buying it? Does it typically cost much more than renting a place for a few years and then eventually buying? Is the eventual cost the same as simply getting a mortgage and buying the house?
posted by El_Marto to work & money (4 comments total)

My impression of lease to own when it comes to houses is that the monthly payment is higher and counts towards some of your down payment. The down side (of most, I believe) is that if you decide not to buy and move on, that extra money you've been paying is gone forever. I think in general the terms of lease to own agreements are MUCH more favorable to the current owner, not the current renter.
posted by dave*p at 9:56 AM on March 2

it's along the same lines of "rent to own" furniture. don't do it.
posted by 2003girl at 10:04 AM on March 2

I agree with 2003girl, unless can get an iron clad agreement, don't do it. I was recently in a rent-to-own home and I was completely ripped off. He was asking way, way more than market value for the home. I couldn't have anyone inspect the home before I moved in because he claimed that it was a rental. After I moved in, I noticed several things wrong (including a leak under the bathtub that would require the entire bathroom including floor boards to be removed and redone). However, because he was set on a price (a price higher than when I first rented and nothing was in writting) and would not adjust for the repairs that were necessary, I chose not to buy and lost anything extra that I put into it. But, on the plus side, I bought a much nicer and bigger home for $25K less, and it's in the same exact neighborhood. So, if they are dead set about rent-to-own, make sure that they are allowed to have the home inspected or have it in the contract that you will be able to have any prior damage repaired or have the price adjusted. The absolute only advantage of rent-to-own is that the home will be lived in and you will know everything that needs to be repaired first hand and you get to know what your neighbors are really like before you buy (which is a definite plus.)
posted by kochanie at 10:18 AM on March 2

You would probably do better to put an extra few hundred dollars aside every month on your own rather than doing the rent-to-own thing. Then you can use it on whatever house you want! And put it in something high-yield like a CD or a HY savings account that pays 3% or more, and you'll come out ahead anyway.
posted by rabbitrabbit at 8:01 PM on March 2