What's the lowdown on Rent-to-Own?

[SilverStoned1.8T]

So, I have become a landlord and am in the process of renting out my property. I received an application from a prospective tenant and they are interested in a rent-to-own agreement. How does this work and will it benefit me as a seller/landlord?

I did a quick google search and it looks like you draw up a contract with the buyer/tenant and agree to a price to sell the house and a term for the lease. Then they pay you extra each month which goes towards their down payment and also they pay an option fee that goes towards their down payment. If they don't/can't buy the house at the end of the lease period the seller/landlord gets to keep the option fee and the extra that they paid monthly. Is this correct? If so, I don't see much downside as a seller/landlord.

[twilk]

Biggest downside I see is if the market goes up, you are locked into that sales price if they decide to take the purchase option. If you are happy with the price and don't care if they buy or just rent it could be a good option. In a rising market it could end up leaving a lot of dollars on the table.

Where do you think it's headed?

[SilverStoned1.8T]

I really just want to break even on the house. Which I guess could be a problem in even negotiating a sales price right off the bat. And I don't mind just renting it out for a while.

[twilk]

I think most of the positives about a rent to own situation or for the renter. It gives them the opportunity to lock in a price way ahead of time but no obligation to purchase. This could be great for someone with a new job or new to an area that is not sure they want to stay.

I would view it as more of a marketing tool from the sellers perspective.

If you can get terms you like and you need it to get it rented, then g for it. If you can rent it without a lot of trouble anyway then no real reason to do it.

[ImRollin]

you don't have to lock-in on the price. You can state that price will be determined at the end of the lease contract by an independent appraiser. I would have a R/E lawyer write up the contract for you.