Renting to Own

Are you looking for apartments in the Boston area that have the option to purchase the unit? If so, click on the rental button below and put "Rent to Own" in the Notes section. We will go through the listings and send you a list of apartment that currently have a rent to buy option.

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Benefits of Rent to Own Properties

If financial constraints or concerns about a neighborhood's long-term suitability to your lifestyle hamper your dream of owning an apartment, here's a radical thought: Why not try before you buy?

Although it isn't always available, many people nowadays are choosing to go that route. It's called renting to own, and if the building's owner agrees to the idea, it is often possible to lease an apartment for a specified period of time during which some or all of your monthly rent applies toward a future purchase.

An Up-and-Coming Option for the Not-Quite-Ready

The benefits of renting to own are real. The strategy will often allow you to:

• Snag the apartment of your dreams before you've saved enough to buy it outright.
• Lock in a purchase price. In a strong housing market, your equity will grow with every passing month.
• Turn your rental payments into investments.
• Build or repair your credit history. If you do decide to purchase later on, a higher rating will improve your chance of getting a good mortgage.
• Change your mind. If you later choose not to buy the apartment, you need do nothing more than walk away. Remember, though, that if you do, all monies will default to the property owner, and your carefully accumulated investment will evaporate.

How Does Rent-to-Own Work?

At the outset, a rent-to-own situation is not much different from an ordinary apartment lease. The prospective buyer will pay rent on a monthly basis. The difference here is that the monthly rental amount will likely be higher than usual, with any above-market portion earmarked toward a potential down payment. According to the terms of the contract, either all, part or none of the remainder can potentially apply toward the principal or closing costs.

The Lease and the Option

Any rent-to-own contract consists of two disparate parts: the standard lease and the option to purchase. The two can exist as separate entities or as sections of the same document.

The lease segment of the rent-to-own contract is similar to any standard rental agreement. It will clearly state the:

• Tenancy terms.
• Length of lease.
• Occupancy limits.
• Rental amount.
• Payable fees and deposits.

The contract's additional option-to-purchase section must further spell out:

• The duration of the option period. Although negotiable, it will typically range from one to five years.
• The option fee. This non-refundable amount is the consideration that makes the contract legally enforceable. It can range from hundreds to thousands of dollars and will later serve to reduce the principal.
• The selling price. While usually pre-negotiated, some such contracts will alternatively stipulate that the apartment's market value at the time of purchase will determine the final price.

In expectation of eventual transfer of ownership, most rent-to-own contracts will also specify that the tenant, not the property owner, is fiscally responsible for costs related to repairs, maintenance, insurance and taxes.

The Escrow Account

In any rent-to-own situation, the property owner must place an agreed-upon portion of each rental payment into an escrow account. If the tenant does purchase the apartment, this accumulated amount will apply toward the down payment, principal or closing costs. In the event that the tenant declines to acquire the property, the escrow money will default to the seller.

Special Considerations

If a decision to purchase will entail obtaining a mortgage, investigate your options before putting pen to paper. You want to feel sure that you'll qualify when purchase time rolls around.

In any rent-to-own situation, the property owner retains ownership of the apartment and holds the title until the tenant has exercised his right to make the purchase.

While you are renting, keep careful records of every payment you make and expense you incur. A loan officer may need to see them in the future. If you plan to make monthly contributions toward the down payment, be sure to write separate checks for the purpose. This will help you keep track of exactly how much is set aside.

Finally, remember that because a rent-to-buy agreement can be complicated, it is best to have a licensed real estate attorney draw it up or, at the very least, review it. This can help you avoid unwanted tax repercussions and forestall any potential problems with securing a mortgage.