By Anna West
C & G Staff Writer

For renters looking to invest their money in property of their own, renting-to-own offers the opportunity to start making a purchase — even with poor credit.

A rent-to-own arrangement, or a lease-option, can be a “win-win situation” for both the seller and the buyer, according to Billy Currier, an associate broker with Cranbrook Associates in Birmingham.

“Basically, what you’re doing is establishing a price today for a purchase in a year,” said Edwin St. Aubin, agent, president and owner of Edwin St. Aubin and Company Real Estate in Sterling Heights.

In a lease-option contract, the seller and the buyer agree on a fixed purchase price for the house as well as a lease arrangement. The buyer pays an option fee, which could range from nothing to thousands of dollars, to secure the option of purchasing the home at the fixed price at the end of the lease.

The buyer will then lease the house for a certain length of time with a portion of each month’s rent going toward the price of the house. At the end of the term, the buyer can choose whether to purchase the house, having built a down payment through the option fee and lease money.

“It all depends on how you structure it,” said Currier.

Doug Clayton, an agent broker with Community Choice Realty in Rochester Hills, agrees.

“There’re no real rules,” said Clayton. “Buyers need to be aware of that.” He recommends getting the help of an agent when creating a lease-option agreement. “The contract can be written up any way you want.”

Some of the factors that are negotiable include rent rate, the amount of rent applied toward the purchase price and the cost of the option, said St. Aubin.

For example, Currier explained, a buyer can request to do a lease-option for two years with the option to follow through at any time, which means the buyer could execute the purchase at any time during that term — giving the buyer the chance to stop renting as soon as it is affordable to make the purchase.

If a buyer decides not to purchase the home, the seller keeps the money that would have been applied to the price of the house — including the option fee.

“It’s usually for people who cannot buy right now (due to economic or relational circumstances); it enables them to get into the house and start making it their own,” said Currier.

“They have a stake in the property, and they get to live in the house and see if they like it and the neighborhood,” said St. Aubin.

A lease-option also helps a buyer build credit, creating a paper trail of the down payment through the rent.

“The mortgage industry has really had to tighten their reins,” said Clayton. “For anyone with less than savory credit, this is a nice option to get into a house.”

For the seller, the advantage is having rent-paying tenants in the house who will take care of the property like it’s their own.

“They’ll treat it better than the normal renter,” said Currier.

The seller also has the security of keeping the option fee and all of the rent money if the buyer decides not to purchase the house.

“When I do rent with option, the house is up for sale, but we also do the rent with option,” said Clayton. “It gives people an opportunity to get out of whatever situation they’re in,” both the seller and the buyer.

In the current market, this arrangement may be a solution for some sellers and buyers.

“I think you’ll start to see more people choose this option,” said Currier.

For guidance from real estate experts, call Edwin St. Aubin at Edwin St. Aubin and Company Real Estate at (586) 457-1011, Billy Currier at Cranbrook Associates in Birmingham at (248) 645-2500 or Doug Clayton at Community Choice Realty at (586) 808-0100

You can reach Staff Writer Anna West at awest@candgnews.com or at (586) 279-1104.