Owning a condominium is a dream for many people who want to have a property of their own, but not necessarily a standard home. Like other residential properties, it’s a big financial commitment, which is why some seek a rent to own condo as an attempt to ease into ownership.
Much like other rent-to-own properties, it’s not as straightforward as simply finding any condo for rent and transitioning to ownership.
As such, we’re going to cover information you need to know about finding and vetting legitimate rent to own programs, and walk through the steps you’ll need to take to achieve condo ownership.
What is a Rent to Own Condo?
A rent to own condominium parallels other real estate agreements that share the idea: in any rent-to-own scenario, the idea is that the lessee eventually purchases the property.
Eventually, you’ll be faced with the same tasks as other real estate purchases. Most will opt to work with a real estate agent who can help find properties fitting your criteria with owners (or property management companies) willing to enter such agreements – as well as handle administrative tasks throughout the process.
Near the end of the initial lease or rental agreement, you’ll likely need to obtain a mortgage loan to finance the purchase. This means saving an adequate amount for the down payment and closing costs.
What Are The Cons Of Renting A Condo?
Most areas with condo developments are usually subjected to homeowner association (HOA) management or something similar. The nice part is that these organizations often help keep the area in good repair and maintain a consistent look throughout the development.
However, those with more eclectic tastes may clash with management over different aesthetic choices for their property. As such, it’s important to fully understand management expectations for locations you’re considering for a rent to own condo, as you will usually be limited in what you can display on your property.
You’ll also pay extra fees whether purchasing or simply leasing a condo apartment for rent. On the plus side, fees you pay go toward the upkeep of your property and the neighborhood. Just make sure to note any material related to property presentation, especially if you’d like to display certain items or customize the property.
A Path to Homeownership, Beginning with a Condo for Rent
Rent to own condo programs offer a unique path to ownership: you’ll lease the condo with a portion of your down payment (or the whole payment, though this is less common). There’s typically an option fee to secure the right to buy at a predetermined price by the lease end. But if you choose not to purchase, the option fee is forfeited along with any rent paid toward the home.
While legitimate rent to own programs are suitable for various properties, condos offer an attractive option for those seeking a low-maintenance lifestyle within a community setting. Pursuing a rent to own condo purchase may be particularly advantageous for you if:
- You need to build credit. Life happens and this can sometimes interfere with repaying debts, thus affecting your credit scores. Credit scores need to meet a minimum threshold for most lending scenarios, and better scores translate to more favorable mortgage terms. Rent to own condominiums allow you to establish residency and improve your credit score before committing to a traditional purchase.
- You’re saving for a down payment. The rent to own condo program provides extra time to accumulate savings for the down payment required for a traditional mortgage. Finding available places can be a challenge in some markets, meaning a rent to own situation can allow you to secure a property while saving up to buy the property.
- You’re not 100% committed to the condo lifestyle. Condos rent to own let you experience the condo’s lifestyle and solidify your desire for the area before taking the plunge into homeownership. While you will typically lose your option fee and rent paid, it’s only slightly more expensive than renting, which some view as a worthwhile expenditure.
Rent to Own Condo Contracts
Before you transition to purchasing the property, you’ll need to sign a contract for the duration of your lease or rental agreement, much like any other rent to own home.
- Lease Option Agreement. This agreement offers more flexibility. You’ll pay an upfront option fee to secure the right to buy the condo at a predetermined price within a set timeframe (usually 1-3 years). A portion of what you pay to rent your condo may go towards the down payment if you exercise the purchase option at the end, but the amount can vary between different contracts. However, you’re not obligated to buy, and if you choose not to, the option fee and accumulated rent credit are forfeited.
- Lease Purchase Agreement. With a lease-purchase agreement, you’re committing to buying the condo at the end of the lease term. The purchase price is established upfront and a portion of your rent goes towards the down payment, depending on the agreement, aiding in your financial planning for securing a mortgage. However, if you’re unable to obtain financing by the end of the lease, you’ll lose the accumulated rent credit and could potentially face legal repercussions from the seller.
The best option for you to pursue a rent to own condominium depends on your financial situation and risk tolerance. A lease option provides more flexibility but comes with less certainty. Conversely, a lease purchase offers a clearer path to ownership but requires a stronger financial commitment. Consulting with a real estate professional can help you navigate these options and determine the best fit for your rent to own condo goals.
Why Is Buying A Condo Better Than A House?
Condominiums are ideal for those who desire a home but want an experience with less hands-on maintenance and upkeep. If you’re on board with condo development rules and don’t mind paying the extra fees for the services provided, a rent to own condo can be ideal if you’d like to buy, but need a little more time to get matters in order.
