Rent to Own - Rent to Buy – Advantages and Disadvantages

Having your own house is everyone’s dream and nowadays it can be reached easily with the rent to buy method. The rent to buy process, also known as rent to own (RTO) is a sales method wherein the house is rented out for a certain period of time, usually years, until the time when the renter has paid in full the total market value of the house at the date of the contract signed between the renter and the seller.

While this may be the best way to achieve your dream home, there are advantages and disadvantages to the rent to buy method – both for the seller and the renter as well. 

Yes, the renter gets to move into the house as soon as a contract has been signed, but there are some advantages and disadvantages that are also attached. One of the advantages of using the rent to buy option is that you can choose to own the house at the end of the leasing period when the full amount has been paid through the rents – unfortunately, there are also times when you might change your mind and this will lessen your money for the next house you decide to purchase. By agreeing to purchase a house by rent to buy method, you can also lock in a lower market value for the house in case the price rises by the year. In the same way, it is also a disadvantage, especially if the market value happens to decrease. 

For the sellers, the rent to buy method is also just as much advantageous as it is not, mainly because of the uncontrolled real estate market. One of the advantages for sellers is that they may be able to earn more than they deem to with a good deal. As the seller, they can choose to split the monthly rents – a portion to the total payment, and another portion of the monthly rent that will not be included in the total market price to be paid by the renter (thus, their actual rent and the seller’s additional income). While it will be an advantage to slowly sell a house and earn income from it, it is also possible that the seller will regret its early lease because of an increase in market price. 

Before buying or selling by the rent to buy method, make sure to take into consideration the housing market, earnings and other financial situations that may affect your overall financial condition.