A rent is an agreement between a tenant and landlord. It says that for a specific period of time, the renter has the right to buy his rental house for a set price. The more comprehensive the rent to buy option contract, the less chance there is for confusion on each side.

The Basics

The tenant and landlord start by constructing a contract, formalizing their agreement. The contract should include basic data, like the address of the the property in question, in addition to the names and contact information to both the landlord and renter.

Revenue Cost

The sales price must be determined from the contract and isn’t usually subject to renegotiation. Due to the unstable nature of real estate values, it’s particularly important for both parties to carefully look at the sum of money they are agreeing upon as a sales price. If values fall dramatically after the price was set, the purchaser can end up with a guarantee to pay more to get a house than it’s worth. In case the value appreciates during the period of the contract, it’s possible that the operator will create less on his property than it’s worth.

Time Frame

Time frame is a significant factor in a rent to buy agreement. If the renter has credit issues he needs time to clean up, he might ask for a longer-term contract. The owner may hope to get a shorter-term contract if he needs out from under possession of the house. The average rent to buy agreement lasts from three to five decades.

Option Fee

A choice fee is occasionally known as a thought fee. Essentiallythis is money the tenant gives the landlord in exchange for his guarantee that the home will not be offered to anybody else for the duration of the rent to buy contract. The commission usually ranges from 3 to 7% of their agreed-upon sales price. Later, 100 percent of the commission is applied to the sales price of the house when the tenant exercises his right to buy and secures a mortgage on the property. If he does not buy the house, fee is non-refundable. The alternative fee shouldn’t be confused with a security deposit, that is also due to the landlord upon move-in to protect against damages to the home.

Rent Premium

Rent premium, sometimes referred to as rent credit, is a set sum of the monthly rent that is applied as a down payment on the house. The rent premium usually ranges between 30 and 50% of their monthly payment. For instance, if the rent premium is set at 40 percent and the monthly rental payment is $1,000, $400 would be applied to the rent premium each month. Normally, the landlord/tenant agreement says that 0 percent of the rent premium will be applied for any month in which the tenant is late with his rental payment. Like the alternative fee, 100 percent of the rent premium is subtracted from the price of the house if the tenant exercises his right to buy the property. If he does not buy the home, the rent premium is non refundable.


A rent to buy agreement resembles a normal landlord/tenant agreement in that the landlord is responsible for major repairs to the home and for making certain the home is in habitable state throughout the rental period. Having a rent to buy agreement, though, there is room for discussion on topics such as who will visit minor repairs and yard maintenance.


By the end of the agreed time period, the renter must either procure a mortgage to buy the property or provide the landlord with notice of his intention to not buy. If the renter doesn’t buy the house, he isn’t eligible for a refund of his choice fee or rental premiums, but might still get a refund of his initial security deposit.

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