Is Renting Things for Your Home a Good Idea in Australia Is Renting Things for Your Home a Good Idea in Aus | Page 2

The Basics
Renting to own a home is somewhat similar to a car lease. The seller has given his tenant the right to
buy the house at some point in the future, usually one to three years out, for a price that is agreed upon
today. Generally, the tenant will pay a fee, called option money, that will keep open the option of
buying. In addition, it is common for the tenant to pay about 20% above the typical rent for the house.
So if a home were to normally rent for $1000/month, a rent-to-own tenant would pay $1200. A portion
of that rent will be credited to the tenant for an eventual down payment. This can be a win-win for both
seller and tenant. Many sellers offer this option if they are having trouble unloading the house and can
no longer afford the mortgage payment. Often, you will find that sellers offering rent-to-own as an
option are individuals who have already moved into a new home and are trying to avoid paying double
mortgages for the long term. Tenants who rent-to-own are often individuals who would have trouble
buying a house through the traditional route because of poor credit, low income, or lack of a down
payment. Rent-to-own gives them an opportunity for home ownership while living in the house they will
eventually purchase and it also gives them a chance to discover flaws in the house before committing to
purchasing it.
The Fine Print
Unfortunately, rent-to-own is not always a good deal. If the tenant decides not to purchase the house at
the end of the rental term, none of the extra money that he paid to the seller comes back to him. So he
would have paid above market value for a rental and have no extra cash to show for it. Furthermore,
unlike in traditional rental scenarios, the tenant is often responsible for repairs and maintenance during
the lease term, and any money or sweat equity you put into the rent-to-own property will not be