What You Should Know About Buying A Rent To Own Property In Calgary

You are in the market to purchase a home, but maybe your credit isn’t quite ready for a mortgage approval. Maybe you don’t have all of your down payment saved up yet. Maybe you would like to “test drive” a property for a few years and see if you like it. If these scenarios sound like you, then a rent to own property might be a good fit. However, before you sign any agreements, there are some things you should know about buying a rent to own property in Calgary, Alberta.

What Is A Rent To Own Property?

Buying a rent to own property in Calgary simply means that it is a lease-option agreement with a traditional lease and an option to buy the property at the end of the lease period (typically 2-4 years). The lease-option agreement is not to be confused with the traditional lease-purchase agreement, typically seen more in automotive sales, where you are required to purchase the property at the end of the lease term whether you really want to or not. Basically, you pay market rent to the current owner/landlord through the duration of the lease, plus an additional portion towards the “down payment of the house”, but more correctly stated as an “option credit” as you are paying into an “option” to purchase the property.

Buying The Property

You will most likely have to pay an option fee which is an upfront, non-refundable consideration monies for the ability or “option” to purchase the property in the future. This fee is negotiable but is usually between 2.5% and 7% of the purchase price. Your rent to own agreement should also specify when and how the final purchase price will be determined. Typically buyers prefer to lock in the final purchase price when they sign the lease. This will help them if the house prices in Calgary are on the rise, but it might also be higher than the current market price. Other buyers will decide to determine the purchase price at the end of the lease to reflect a price more comparable to the current market price. 

Who Is Responsible For Taxes and Repairs?

The current owner is responsible for any property taxes, homeowners association fees, and insurance. Before you agree to anything, make sure the property taxes are paid current. Depending on the terms of the rent to own lease agreement, you may be responsible for maintaining the property and paying for repairs. Typically, the current owner handles major repairs (structural repairs) on the home, but you may be responsible for lawn maintenance, appliances, pressure washing, etc. Make sure your lease is extremely clear on who would be responsible for items such as large appliances, structural repairs, and routine maintenance.

When The Lease Ends

Now that the lease is over, you either have to buy the property, or you may have a chance to renegotiate a longer term if you aren’t quite ready to buy. It all depends on your rent to own agreement. If you chose the lease-option agreement, it is now time to secure funding if you decide you would like to purchase the property. If you are unable to secure funding, or you do not want to buy the property anymore, you are not obligated to buy the property but will most likely lose your “option money” you paid. Again, it all depends on your agreement.

Give ASAP House Buyers a call today at (403) 613-8119 or send us a message to discuss these and other things you should know about buying a rent to own property in Calgary, Alberta. We can help you decide which property is right for you.

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