How the “rent-to-own” scam is stealing your money and wasting your life

You might have seen ads online for rent-to-own homes as a way to own a home when buying one seems too expensive. However, you may not know that these deals have often tricked people. Many have spent money, time, and effort on a home they never got to own.

What is rent-to-own?

Rent-to-own is an agreement where you agree to buy a home after renting it for a certain time. It’s similar to leasing a car with the option to buy it when the lease ends.

If everyone follows the agreement, it can work out well. However, some dishonest people in the rent-to-own market have tricked others who hoped to become homeowners.

What are the risks?

Rent-to-own contracts are usually stricter than regular rental or purchase agreements. In these contracts, you agree to eventually buy the home, but you’re not buying the property right away. Instead, you’re buying the right to buy it later. If you don’t follow the contract exactly, you can be kicked out and lose all the money you’ve put into the home.

A 21-year study by the Texas Department of Housing and Community Affairs found that less than 20% of people who entered rent-to-own deals actually ended up owning their home. Nearly half of them couldn’t keep up with payments and lost their contracts.

The Atlantic reports that many people get tricked in rent-to-own deals because they don’t fully understand the process. Thinking the house will eventually be theirs, many tenants spend a lot of money fixing up the home, which often needs a lot of repairs. If they miss payments, they can lose their contract. This leaves them with a nicely fixed-up house that still belongs to the landlord and a lot of wasted money.

How to rent-to-own the right way

Always read the contract carefully. It’s very important to understand what you need to do and what happens if you don’t follow the rules. Make sure your contract includes the home price, the rent cost, and the final date when you can buy the house. It should also tell you how much of your rent will go towards buying the home and how you should make these payments.

Be careful with the terms about eviction. Make sure the contract doesn’t make it easy for you to be kicked out, especially if you’ve spent money fixing up the home. If there is a chance you could be evicted, the contract should say how you will be paid back for what you’ve put into the house.

Hire a lawyer to check your contract. Most of us aren’t trained to understand complex legal documents. Paying a lawyer to review it and give you advice is a good investment, especially since you’re entering a contract that lasts several years and involves a lot of money.

Watch out for home loans. When it’s time to buy the house according to your contract, be ready to get a home loan. This helps you move from the risky rent-to-own agreement to actually owning the home.

Renting-to-own can be a good choice for people who want to own a home but can’t get regular home loans or compete in their housing market. It might seem like a great way to achieve the American dream. Just be careful not to sign a contract that turns into an American nightmare.