Rent-to-own real estate might sound like a great deal - start making rent payments now and have it all go toward the purchase price of your new house. What advocates often don't tell you is that many rent-to-own tenants never wind up owning their homes but instead lose their hefty options considerations (also known as a down payment). If you want to learn the real truth about the down side of rent-to-own real estate, keep reading.

Your Entire Rent Doesn't All Go Toward the House

A common misconception about rent-to-own arrangements is thinking that your entire monthly rent payment will go toward the purchase price of the house. That would the imply the owner of the home isn't charging you interest or earning interest on your options consideration.

You Have to Pay Money Up Front

Many rent-to-own schemes offer no-credit, no-money-down houses, but it's simply not true. Most rent-to-own arrangements require what's called an "options consideration." This is typically between 1 and 5 percent of the final sale price of the home.

Your "Down Payment" Doesn't Entitle You to A Piece of the Property

It's a common misconception that your options consideration is a down payment, but that simply isn't so. A down payment implies you're putting money down on a house in exchange for a piece of its equity. An options consideration does go toward the final purchase price of a house, but if you don't wind up buying the house, you will lose the funds.

Many Renters Never Own

Rent-to-own is great for people who have almost good enough credit or just want to get into a house, but don't have sufficient fund for a down payment. Unfortunately, rent-to-own arrangements are typically marketed to renters with bad credit, low incomes and little hope of ever obtaining the financing needed to purchase the home before the option deadline.

Scams do Exist

Rent-to-own scams exist. If a rent-to-own agent is asking you for up front money, a finder's fee or money to "fix your credit," you should walk away. Also, to protect yourself from poor deals, always hire an attorney to review a rent-to-own contract before you sign it.

Yes, an attorney will cost you a few hundred dollars, but his or her services could be saving you thousands and your own possibilities for future home ownership.

Finding a home that you can rent with a future option to buy it can be a great opportunity for individuals or families that do not yet have sufficient funds to purchase a home outright. However, caution is important when considering this option.

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