Get Started With Us Instantly »

5 Things to Consider With a Rent-To-Own Agreement

July 27th, 2023

Have you been thinking about setting up a rent-to-own arrangement for your home? Rent-to-own agreements can be great for earning rental income, having a bigger pool of buyers, and ensuring your home goes to the right person, but there are still some potential pitfalls to be aware of. So, today, our experts at Evergreen Home Buyers have compiled a list of 5 things to consider with a rent-to-own agreement so you can make the best decision for your property.

1. Finding an Ideal Candidate
The first task you’ll need to undertake when setting up a rent-to-own agreement is finding an ideal candidate. You’ll want to vet your prospective tenants to ensure they understand the arrangement and plan to stay put for a while. If they’re looking for this type of setup, it’s probably because they don’t have the funds or the credit score to go the traditional route, and as long as they’re working towards qualifying for a mortgage, they could be a good fit.

2. Negotiating Payment Structure
Once you’ve found a satisfactory tenant, it’s time to begin negotiating the payment structure. In other words, you’ll need to determine if the rent payments will go toward the home’s purchase price. Typically, with a rent-to-own agreement, the rent payments are a little higher than usual because the sellers will set aside a percentage of the rent payment as a credit toward the future purchase.

3. No Guarantee of Purchase
Something else you need to consider with this type of arrangement is that, unfortunately, there is no guarantee that your tenants will end up purchasing your home. This could be for a variety of reasons; maybe they found a better situation, or perhaps they couldn’t be approved for a mortgage in the end due to low income or credit score. Either way, it’s important to keep in mind that even if you find the perfect tenant, they could still back out on the deal before you can get to the ‘own’ part of the agreement.

4. Discovering Problems
When a tenant lives in your home prior to purchasing it, the chances of them discovering problems increase significantly. Not only could your tenants discover a problem, but they could potentially even damage the home while they’re in it and then back out of the agreement altogether. However, if you’re diligent with repairs and confident in the state of your home, this might not be as large of a concern.

5. Unexpected Market Fluctuations
Finally, you need to be prepared to deal with unexpected market fluctuations. For example, if you have a rent-to-own agreement in place but then the market fluctuates in your favor, you’ll miss out on that appreciation. On the flip side, if the market takes a downturn and the renters back out, you could be left with your property in a less profitable market.

Final Thoughts
Although a rent-to-own agreement could be the perfect solution for selling your home, there are some factors to consider, such as the ones we’ve discussed here. But what if you’re not interested in securing a long-term solution with a rent-to-own agreement but rather selling your home as quickly as possible? Well, there is an alternative option.

At Evergreen Home Buyers, we will purchase your home for cash AS IS, making the process entirely hands-off for you with no repairs, inspections, appraisals, or contingencies necessary. Plus, we can close in as little as two weeks! So, for a completely quick and painless way to sell your home for cash faster, visit today.

What Our Customers Are Saying

I love Daniel. He has such a down to earth personality and is so helpful. Kim
Get Started Now

Get a Cash Offer for Your Home Today!No Repairs. No Fees. Close When You Want To.

Instantly Begin Now


Schedule a Call