Higher-than-average rent payments
One of the important aspects of a rent-to-own contract is the rent credit, which allows you to build equity in the house that you intend to purchase. Every month, a small portion of the rent you pay goes towards the house’s purchase price.
Let us say you sign a three year contract with a landlord whose house is valued at $300,000 and agree to pay $1,500 a month as rent.
If the owner agrees to allocate 30% of the rent payments toward the purchase price you can earn a $450 rent credit on a monthly basis. In three years, you can earn $16,200 ($450 x 36 months) as rent credit.
After three years, if you decide to buy the house, you will only have to pay $274,800, as the rent credit ($16,200) and the option money ($9,000) will be deducted from the purchase price.
It should be noted that the rent for a rent-to-own property is usually higher than the average rent in the area, since a portion of it goes towards the purchase price.
