Benefits of Rent-To-Own – Can it work in Kenya?

Mortgages have always been the option for buyers who cannot afford to pay cash for their dream home. However, to qualify for a mortgage the potential buyer must have a good credit history, cash for the down payment and the liquidity to service the long-term payments. If a potential buyer doesn’t qualify for a mortgage due to credit issues or insolvency, there is a better option for owning that dream home; it is called rent-to-own. This is an agreement between the potential buyer and the seller allowing the buyer enough time to save for the full purchase of the home while living in the house. Before any prospective buyer considers this arrangement, it is crucial to understand how it works, its benefits and the risks involved.

How it Works

In this plan, the buyer stays in the house while paying an agreed amount of monthly rent for a given period of time before finally buying it. The time frame is usually between one to three years. Within this period, the potential buyer has time to prepare for the full purchase of the home. Typically the buyer agrees with the seller on the purchase price of the home prior to signing the lease contract. The seller may then ask the buyer for a one-time non-refundable down payment called the option money, usually between 3% and 5% of the total purchase price. This payment gives the buyer an option to purchase the home in the future once the lease period expires.

Benefits of Rent-To-Own

This option can be very beneficial to a prospective buyer who is not financially able to afford a mortgage. It allows them time to build their income or correct their credit history while already living in the house. The benefits include:

· Opportunity to live in your dream home

In a typical situation, potential homeowners have to save for a long time before acquiring their dream home. The rent to own option saves the buyer such agony. Upon signing the contract, the buyer moves into the home on rental terms. It, therefore, allows them to live in the dream home as they prepare for the full purchase.

· Ability to own a home with a poor credit score

In most cases potential buyers fail to qualify for a mortgage due to poor credit history. Rent-to-own on the other hand does not require credit score evaluation. Regardless of their credit score, buyers can comfortably acquire a home through the plan. This option, therefore, gives a wishful homeowner a chance to own a home even with poor credit history.

· A test of the home and the neighborhood

Rent-to-own gives the potential buyer chance to have the feel of their prospective home and the surrounding neighborhood as they look forward to buying it. The wishful buyer gets well acquainted with the environment and has time to assess its suitability as their home. They are also able to check on important aspects like schools for their children and social amenities within the neighborhood. By the time they buy the house, they are conversant with the home neighborhood.

· Understanding the condition of the house

By moving into the home on rental terms, the potential buyer is able to assess the house condition and determine if there are any major issues that may need attention before buying it. These could be repairs needed or some unattended to maintenance issues. The prospective buyer can therefore estimate and prepare for the expenses associated with owning the house.

· Transforms rent into investment

Rent-to-own is the only plan that adds an investment value to rent. When the potential buyer moves into the house and starts paying rent, they may be given credit by the seller towards the purchase price. This means that a portion of the rent gets credited to the purchase price of the house. For instance, if the monthly rent is $700 and the buyer pays $1000, the extra $300 per month will be credited to the purchase price. Through this option, renters can, therefore, transform a portion of their rent into a lifetime investment.

· Guaranteed place to stay

Potential homeowners often have to find an alternative place to stay as they prepare to purchase their own home. This is different with rent-to-own. The plan guarantees the buyer a comfortable place to stay as they work on their home ownership strategy. There can never be a better option than staying in your identified dream home as you strategize on owning it.

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Risks associated with rent-to-own

Of course, not all lease options come up in roses. It is, therefore, important for the buyer to be to be well informed on some facts before signing that contract.

The seller’s credit report; Look out for warning signs such as notices send to the house over unpaid debts. If the seller loses the house due to debts or other reasons, the potential buyer loses the possibility of buying it and my end up forfeiting any extra rent already paid.

Be cautious of unscrupulous sellers. Some devious sellers may refuse to sell the house at the end of the lease period or back out of the contract when the real estate market appreciates. It is, therefore, important to get legal advice regarding the contract before committing to it. Where possible the buyer can hire an attorney’s services throughout the transaction period.

Based on the purchase price originally agreed upon when the contract is signed, the buyer will still have to pay the specified amount in the event that the house value depreciates at the end of the lease period. For instance, if the agreed purchase price is $100 000 and the house value depreciates to $70 000 by the end of the lease period, the buyer will have to pay the $100 000 as stated in the contract.


Rent-to-own is clearly the best alternative for prospective homeowners who do not qualify for a mortgage due to credit issues or recent bankruptcies. It gives the buyer a chance to live in their dream home as they prepare to buy it in the future. However, it is essential for the buyer to understand how it works and any risks involved. This will help them make informed choices to avoid losing money. Rent-to-own is the most convenient way to own a home if you can find an arrangement you agree on.

Can such an arrangment work in the Kenyan Real Estate Market today?

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