"For Rent" sign in front of row of condos.

Rent-To-Own Condos: What They Are And How They Work

August 02, 2023 5-minute read

Author: Victoria Araj


Are you interested in owning a condo but not feeling financially prepared enough to commit and make the purchase? Owning property is a goal most people strive to accomplish at some point in life, but certain obstacles such as a low credit score or a lack of money for a down payment can make homeownership seem far-fetched.

However, thanks to some unique financing opportunities that include rent-to-own programs, you can still accomplish your homeownership goals – just in a different way.

Let’s take a closer look at rent-to-own programs and how you can use one to eventually own the condominium of your dreams.

Rent-To-Own Condo Programs, Explained

Like the name implies, a rent-to-own program allows someone to purchase a property after a period of renting. These programs exist for condos and other types of homes.

You’ll end up paying a little more in rent during a rent-to-own contract, and the extra money later becomes your down payment at the end of the lease. Additionally, you’ll usually have to pay an option fee that holds your opportunity to buy the condo. This fee is typically negotiable but customarily 2% – 7% of the condo’s value.

If you decide against purchasing the condo when the lease expires, you lose your extra payments.

How Rent-To-Own Programs Work

A rent-to-own program operates like a regular lease agreement, but a portion of your monthly rent payment goes toward the purchase price of the condo. The contract you and the seller agree on will spell out the terms you need to follow, including how long you have to pay rent before buying the condo.

When the lease term expires, you’ll either purchase the condo or move on and live elsewhere, depending on which type of contract you and the seller decided on at the beginning.

We’ll discuss the contract options in more detail later on, but let’s first take a look at who might benefit from a rent-to-own condo situation.

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Who Should Consider A Rent-To-Own Condo Program?

Rent-to-own contracts are available for numerous types of homes, but if you’re attracted to community living and a lack of maintenance responsibility, you may find that a condo is a great fit for you.

But how do you know if you should rent to own a condo instead of just renting or purchasing it the traditional way? You might benefit from participating in a rent-to-own program if any combination of the following is true:

  • You need additional time to improve your credit score. You’re more likely to qualify for a mortgage loan if you have a decent credit score. A higher credit score also allows you to get a better interest rate on your mortgage. Renting to own will give you more time to boost your credit score if it’s not where it needs to be for a home purchase.
  • You need additional time to save for a down payment. Buying a home comes with its share of expenses, including a down payment. If you don’t have money saved for a down payment, participating in a rent-to-own condo program will give you more time to pad your savings.
  • You’re sure about where you want to live. Maybe you’ve found a condo in the perfect location, within walking distance of your favorite restaurants and with a short commute to work. If you’re sure where you want to live but not quite ready to financially commit to buying, renting to own a condo might be a terrific option.

Types Of Rent-To-Own Contracts

You’ll encounter two types of contracts when you enter a rent-to-own agreement with a condo owner. One is a lease-option agreement, and the other is a lease-purchase agreement.

These contracts offer the buyer and seller different incentives and come with their own set of stipulations. Regardless of which contract type you choose, it’s important to work alongside a trusted real estate agent and attorney while developing the contract so you know exactly what you’re signing up for.

Let’s take a look at both of these rent-to-own contracts so you can determine which is best for your situation.

Lease-Option Agreement

A lease-option agreement presents the renter (and potential buyer) with the freedom to decide whether they want to purchase the condo when the lease expires. At the end of the lease agreement, the renter can walk away and isn’t legally obligated to continue renting or purchase the property.

The downside for the renter is that they lose out on the money they’ve invested in the property, including the option fee they paid upfront and the portions of rental payments that were applied to the purchase.

A lease-option agreement is usually better for the renter than the seller, however, because it gives the renter the opportunity to purchase the property or walk away at the end of the lease.

Lease-Purchase Agreement

On the contrary, the lease-purchase agreement is more favorable to the seller, because it establishes that the renter is legally obligated to purchase the property when the lease expires.

Renters usually forgo this contract in favor of the lease-option agreement unless they’re able to predetermine a purchase price for the condo.

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Pros And Cons Of A Rent-To-Own Condo

Let’s take a look at some of the pros and cons of participating in a rent-to-own condo program as the renter and potential buyer.


  • You have time to save for a down payment.
  • You have time to improve your credit score.
  • You get to pay toward your purchase price before taking on a mortgage.
  • You get to enjoy the unit and neighborhood before purchasing the condo.
  • You can lock in a purchase price you’re comfortable with and can budget for.
  • You save on repair costs.
  • If you go with the lease-option contract, you can decide whether you want to purchase the condo after your lease ends or move elsewhere.


  • You may have a difficult time agreeing with the seller on a purchase price.
  • You may lose the money you paid in rent along with the option fee if you choose not to purchase the condo.
  • You might be contractually obligated to purchase a condo that decreased in value during the renting process.
  • You might not be able to purchase the condo if you’re unable to qualify for a home loan by the end of the lease.

Where Do You Find Rent-To-Own Condo Listings?

If you’re on the hunt for a rent-to-own condo, it’s best to conduct some research on condo buildings in the area you want to live in. You may also find it helpful to discuss your desires with condo owners nearby.

For full access to rent-to-own programs, you’ll benefit from enlisting the help of a trusted real estate agent who should be aware of local rent-to-own homes and can set filters within the multiple listing service (MLS) based on your preferences.

The Bottom Line

If you want to buy a condo but need more time to improve your credit score, save for a down payment and secure a mortgage loan with a good interest rate, renting to own might be an attractive option for you.

To ensure you enter into a successful contractual agreement with a seller, enlist the help of a knowledgeable real estate agent and attorney. You’ll need to choose between a lease-option and a lease-purchase agreement, and getting assistance from professionals should benefit you significantly in this process.

Do you already have an ideal credit score and a down payment saved up? If so, you might want to skip the renting-to-own process and dive right into homeownership. Take action today and start your mortgage application online with the Home Loan Experts at Rocket Mortgage®.

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Victoria Araj

Victoria Araj is a Section Editor for Rocket Mortgage and held roles in mortgage banking, public relations and more in her 15+ years with the company. She holds a bachelor’s degree in journalism with an emphasis in political science from Michigan State University, and a master’s degree in public administration from the University of Michigan.