To some people eager to own their first apartment, it may seem like there’s no easy purchase option without putting down cash or getting a mortgage. Rent-to-own apartments offer a solution. At the end of an apartment rental lease, the tenant has the option to buy the apartment for a predetermined price fixed in the written agreement. However, most people who sign rent-to-own leases ultimately decide not to buy the apartment, so there may be cause to opt for more traditional forms of renting. Should you rent-to-own or just rent? Find some pros and cons below.
Pros of rent-to-own instead of traditional rent
Easier purchase route for buyers with bad credit
Having bad credit makes purchasing an apartment immensely challenging. Renting with bad credit is tough too, but it’s certainly easier than buying, so if you have low credit and you want to buy an apartment, rent-to-own leases can decrease the number of obstacles you’d normally face.
You’ll know before you buy
Buying an apartment is a huge decision, and it’s not one without its uncertainties. How can you be certain the apartment you’re buying is right for you and feels like home? When you sign a rent-to-own lease, you’ll know everything about your apartment before you buy it – and you can always back out if you don’t want to make the purchase.
Better purchase price
Since rent-to-own leases fix the purchase price of the apartment, you can get ahead of potential rising real estate costs by signing a rent-to-own lease that runs longer than the average one-year period. If you sign a rent-to-own lease now that runs through 2023 and apartment purchase prices increase during this period, then you’ve snagged a great deal on buying your first apartment.
Cons of rent-to-own instead of traditional rent
If you’re renting a rent-to-own apartment that you ultimately decide not to buy, you’ve spent money toward a purchase you haven’t made, ultimately rendering your situation the same as any ordinary lease agreement. If you’re considering a rent-to-own lease with a high monthly payment and aren’t certain you’ll want to buy the apartment, you might do best to stick with traditional rent.
Just because you might own the apartment in the future doesn’t mean you own it now. You’ll still have to go through your landlord for maintenance issues and other needs you could handle independently if you owned the apartment. And if your landlord is negligent while you rent the apartment, then when you purchase it, it might not be in as good of condition as you’d anticipated.
Worse purchase price
Just as apartment prices might rise with time, they could fall, too. If you sign a rent-to-own lease and the fixed purchase price is higher than the market average upon your lease ending, then you’re stuck paying extra for an apartment you’ve grown to love. Recent rent-to-own tenants may have experienced this pitfall: In 2019, for the first time in two years, the average national rental price dropped. Although the future of real estate prices is hard to predict, you might be better safe than sorry.
Would you ever sign a rent-to-own lease? Share why or why not in the comments!