Pros and Cons of Condo Rent-to-Own Programs

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If you lack upfront deposit money, have poor credit, or are just nervous about a home-purchase commitment, a condo rent-to-own program can help you get a foot in the door to homeownership.

This ease-in process can also help you build equity while renting, improve your financial standing, and give you time to decide if condo life suits you. However, a rent-to-own condo program comes with some risks, and the benefits are dependent on your ability to follow through with the purchase.

Work With a Top Agent to Find a Rent-to-Own Home

When considering a rent-to-own home, working with a real estate agent experienced in these types of deals can help you navigate the process and find a great deal.

What is a rent-to-own condo program?

A rent-to-own condo program allows you to lease a condo with the option to buy it later. Part of your monthly rent payments typically goes toward your future down payment, making it easier to save up. This arrangement gives you the opportunity to live in the condo while deciding if you want to purchase it. It’s a popular option for those who need time to improve their credit score or accumulate the necessary funds for a down payment.

How does a rent-to-own condo program work?

A rent-to-own condo program involves signing a lease agreement with an option to purchase the condo at a later date. Here’s a look at the two common types of agreements:

Lease-option contract

A lease-option contract provides you with the option to buy the condo at the end of the lease term but does not obligate you to do so. This agreement allows flexibility, as you can decide whether or not to purchase based on your financial situation and how well the condo meets your needs.

Lease-purchase contract

A lease-purchase contract obligates you to buy the condo at the end of the lease term. This agreement is more binding and typically suits those who are more certain about their decision to purchase. With this option, you must be confident in your ability to secure financing by the end of the term.

Which rent-to-own condo lease option is better?

  • For buyers: Buyers often favor a lease-option agreement because it offers more flexibility. If you’re unsure about your ability to secure financing or want to test living in a condo before committing to a purchase, this option essentially provides an escape clause if things don’t work out.
  • For sellers: Sellers usually prefer lease-purchase agreements as they guarantee the sale at the end of the lease term. This option provides more certainty and reduces the risk of having to find another buyer if the current tenant decides not to purchase.

Plan for possible HOA fees and rules

Condos are often located in organized communities with HOA fees, covenants, conditions, and restrictions (CC&Rs). Before you sign a rent-to-own condo option, it’s important to review and understand these fees and regulations to ensure they align with your budget, lifestyle, and expectations.

How long is a typical rent-to-own condo term?

A typical rent-to-own condo term ranges from one to three years. This period allows you to build your credit, save for a down payment, and ensure that the condo meets your long-term needs. The exact duration can vary based on the agreement between you and the seller.

When is a rent-to-own condo price determined?

The purchase price of a rent-to-own condo can be determined at different points in the lease agreement:

  • Upfront when the contract is signed: In some agreements, the purchase price is set at the beginning of the lease term. This can protect you from market fluctuations, ensuring a stable price regardless of changes in the real estate market.
  • During the term: In other agreements, the price may be adjusted during the lease term based on predefined conditions or market trends. This approach allows for some flexibility but can be riskier if market prices rise significantly.
  • At the end of the lease term: Alternatively, the price can be set at the end of the lease term. This method can reflect the current market value but may result in a higher price if the market has appreciated.

Who’s a good fit for a rent-to-own condo?

A couple who bought their condo on a rent to own program
Source: (SCREEN POST / Unsplash)

A rent-to-own condo program can be an excellent choice for various types of buyers. Here are some scenarios where this option might be a good fit:

  • First-time buyers: Ideal for those new to homeownership, offering a chance to build equity while leasing.
  • Buyers with low credit scores: Provides time to improve credit scores before applying for a mortgage.
  • Buyers trying to save for a down payment: Allows a portion of the rent to go towards the future down payment.
  • Buyers wanting to test drive condo life: Offers the opportunity to experience condo living before committing to a purchase.
  • Foreign buyers who lack U.S. credit history: Helps foreign buyers build a credit history in the U.S. while securing a future home.

Are rent-to-own homes on the verge of a comeback?

A recent survey conducted by the Motley Fool Ascent found that 79% of Americans would consider using a rent-to-own program to purchase a house. Millennials showed the highest interest, with 86% saying they would consider a rent-to-own home.

How much does a rent-to-own condo program cost?

The cost of a rent-to-own condo program can vary depending on several factors, including the terms of the lease agreement, the local real estate market, and the specific condo in question. Here are some typical costs to consider:

  • Option fee: An upfront fee that provides you with the option to purchase the condo later. This fee varies and is negotiable, but it typically ranges from 2% to 7% of the purchase price and is usually non-refundable.
  • Rent payments: Monthly rent is typically higher than market rent because a portion goes toward your down payment. This extra amount is often referred to as rent credits.
  • Maintenance and repairs: Depending on the agreement, you may be responsible for maintenance and repairs, which can add to your overall costs.
  • Property taxes and insurance: In some cases, you might need to cover these expenses, so it’s important to clarify who’s responsible for these in your contract.
  • Purchase price: The agreed-upon price for the condo, which can be set at the beginning, during, or end of the lease term, depending on your contract options.

Pros and cons of a rent-to-own condo

Here are some rent-to-own condo program advantages and disadvantages to consider:


  • Path to homeownership: Offers a viable route to owning a condo, especially for those who might not qualify for a traditional mortgage right away.
  • Building equity: Part of your rent payments contributes toward your future down payment.
  • Testing condo life: Allows you to live in the condo and decide if it suits your lifestyle before committing to a purchase.
  • Credit improvement: Provides time to improve your credit score and financial standing.


  • Higher costs: Monthly rent is typically higher due to the rent credits.
  • Risk of loss: If you decide not to purchase the condo, you may lose the option fee and any rent credits.
  • Responsibility for repairs: You may be responsible for maintenance and repairs, depending on the agreement.
  • Market fluctuations: If the market value of the condo decreases, you might end up paying more than its worth if the purchase price is set upfront.

How can I find a rent-to-own condo?

Finding a rent-to-own condo involves exploring various resources and options. Here are some effective ways to locate such opportunities:

  • Real estate websites using search filters: Use filters on real estate listing websites to find rent-to-own properties.
  • Real estate agents: Consult with real estate agents who are familiar with rent-to-own options in your area.
  • Developers offering rent-to-own options: Some developers may offer rent-to-own programs for new condo projects.
  • Social media and forums: Join social media groups and online forums where rent-to-own opportunities are discussed and shared.
  • If you’re already renting a condo: Speak with your landlord about the possibility of transitioning your rental agreement into a rent-to-own contract.

Rent-to-own condo vs. rent-to-own house

Choosing between a rent-to-own condo and a rent-to-own house involves considering several factors. Here are some points to help you decide:

  • Maintenance and repairs: Condos often have HOA fees that cover exterior maintenance, while houses typically require you to handle all maintenance.
  • Space and privacy: Houses usually offer more space and privacy compared to condos, which might be ideal for families or those wanting a yard.
  • Amenities: Condos often come with shared amenities like gyms, pools, and common areas, which might not be available with houses.
  • Location: Condos are often located in urban areas with easy access to city amenities, whereas houses might be in suburban or rural settings.
  • Community: Condos provide a closer community living experience, which can be a plus for those who enjoy social interactions with neighbors.

Condo rent-to-own FAQs

Should I consider a rent-to-own condo?

Rent-to-own condo programs offer a flexible path to homeownership, especially for those with financial or credit challenges. If you’re unable to buy a home the traditional way, this option provides a way to build equity and improve your financial standing while living in your future home. It also allows you to experience condo life before making a long-term commitment.

If you’re considering a rent-to-own condo, HomeLight can connect you with experienced real estate agents who can help you navigate the process and identify local options. We analyze over 27 million transactions and thousands of reviews to determine which agent is best for you based on your needs.

Explore your opportunities and take the first step toward homeownership today.

Header Image Source: (Wes Hicks / Unsplash)