Rent-to-Own Homes in BC 2024

This Page's Content Was Last Updated: February 1, 2024
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What You Should Know

  • With a rent to own arrangement, you can rent a home for a certain length of time and have the option to buy it during or at the end of the lease.
  • Rent-to-own programs can be helpful for those looking to purchase a home but are unable to do so due to issues such as not having enough downpayment or not meeting the credit requirements for a mortgage.
  • Rent-to-own programs require you to make an upfront payment of 1% - 5% of the agreed-upon purchase price, known as an option fee, to get the option to purchase the rental home later.
  • Every month, a portion of the monthly payment, known as rent credit, is set aside to be applied towards the purchase of the home.
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What are Rent-to-Own Programs in BC?

Rent-to-own programs can put you on the path of home ownership when you don’t have enough money saved for a down payment or are unable to qualify for a mortgage due to credit issues. With rent-to-own programs, you will commit to renting a home for a certain length of time, typically 2 - 5 years, and have the option to buy the home during or at the end of the end of the lease period.

During the option period, the period during which you have the option to purchase, you have the first right to buy the home. The landlord is legally bound by an agreement that doesn’t allow them to sell the home to anyone else during this time.

Rent-to-Own British Columbia

Rent-to-own companies typically operate in a particular city or region. You can generally find rent to own companies operating in your vicinity by running a search such as ‘rent to own homes near me’ on an internet search engine. The companies offering rent-to-own programs in different cities of BC are listed below.

Rent to Own Vancouver

Rent to Own Vancouver
RTO HomesGVC Property Solutions
Tuza Investments

Rent to Own Victoria

Rent to Own Victoria
Freedom Rent to Own

Rent to Own Kelowna

Rent to Own Kelowna
Kelowna Rent To Own - Vantage West Realty GroupBritish Columbia House Partners

Rent to Own Surrey

Rent to Own Surrey
Fraser Valley Rent 2 OwnOne Stop Home Buying Centre Inc.
Tuza Investments

Rent to Own Abbotsford

Rent to Own Abbotsford
Fraser Valley Rent 2 Own

You should research a company well before entering a rent-to-own agreement with them. Companies that are members of the professional association Canadian Association of Rent to Own Professionals (CAROP) are required to meet the association’s eligibility criteria and follow its code of conduct. Choosing a CAROP member can ensure you are engaging with a trustworthy company and get a high level of service.

How Does Rent to Own Work?

Similar to any rental agreement, a rent-to-own agreement will require you to pay a monthly rent to the landlord by the rent due date. However, a portion of each rent payment will be put aside to be applied toward the purchase price of the home at the time of purchase. There are two types of rent-to-own agreements:

  • Lease-Option Agreement: This type of agreement gives you the option to buy the home, but you aren’t obligated to make the purchase.
  • Lease-Purchase Agreement: With this type of agreement, you are obligated to purchase the home, and not doing so may result in legal action and penalties.

To understand how rent-to-own works, let us look at some of the key aspects of a rent-to-own arrangement.

Option Fee or Downpayment

The option fee, also referred to as ‘down payment’ or ‘option deposit,’ is a non-refundable fee that you have to pay upfront to the landlord or rent-to-own company. This fee basically gives you the option to purchase the property and is usually due on the move-in date. The fee is typically 1% - 5% of the purchase price, but some companies may even charge you up to 10% of the purchase price.

Rent-to-own programs with a high option fee are typically meant for those who have enough saved for a downpayment but are unable to qualify for a mortgage due to credit issues. Such people can work on repairing their credit scores during the lease period.

Rent Credit

The portion of the rent that is set aside for the purchase of the home is known as rent credit. Thus, the monthly payment can be divided into two parts — monthly rent and rent credit. The percentage of each portion varies from contract to contract, but rent credits often form 25% or more of the total monthly payment. If you decide not to purchase the home, you will likely lose the rent credits you have saved up during the lease period.

Monthly Rent

The monthly rent forms the major portion of the monthly payment and is decided based on the current market rent for a similar property. However, the rent amount should at least be enough to cover the monthly mortgage payments for the property. For example, if the current market rent for a property is $2,000, but the minimum mortgage payment is $2,200, you will be charged $2,200 as the monthly rent. Thus, the rent for rent-to-own homes could be higher than typical rentals based on the market conditions.

Length of Contract

The length of lease-to-own home contracts ranges from one to five years, with an average length of three years. The option period is the duration in which the tenant has the option to purchase the property.

Purchase Price

A rent-to-own agreement can allow you to fix a purchase price for the future purchase of the property years in advance. The purchase price is calculated based on the contract's length and the property's expected market appreciation. For example, you rent to own a home in Kelowna for a three-year period. If the current value of the property is $400,000, and the average annual appreciation in Kelowna is 4%, then after 3 years, the purchase price of the property will be calculated as:

  • Today: $400,000
  • Year 1: $416,000
  • Year 2: $432,640
  • Year 3: $449,946

Maintenance of the Property

A rent-to-own will often work similarly to a rental, with the landlord being responsible for the maintenance and repair of the property. However, based on the agreement, the tenant may have some responsibilities that are required to be carried out regularly for the upkeep of the property, such as snow removal or lawn mowing. Some rent-to-own companies may even want you to start treating the home as your own and take full responsibility for maintaining it.

Property Tax and Utilities

As you don’t own the property, the landlord will be responsible for paying the property taxes for the home during the lease period. As in any rental, the tenants are responsible for making monthly utility bill payments, such as gas, electricity, and internet bills. The tenants are generally required to maintain a renter’s insurance for the duration of the lease.

Example of Rent to Own in BC

For example, you find a home listed on the market for $350,000 that you would like to purchase but don’t have enough saved for a downpayment right now. You decide to enter a rent-to-own agreement with a rent-to-own company. Then, the agreement details would look like this -

Current Price: $350,000
Lease Tenure: 3 Years
Agreed Purchase Price: $395,000 (assuming approximately a 4% annual price increase)
Option Fee (paid upfront): 3% of Purchase Price = 3% x $395,000 = $11,850
Amount Owing After 3 Years: $395,000 - $11,850 = $383,150
Min. Downpayment Required: 5% x $395,000 = $19,750
Min. Rent Credit Payment: $500 (agreed upon)
Monthly Rent Payment: $1,500 (based on the market rates)
Monthly Payment Required: Rent + Rent Credits = $2,000
Rent Credits Saved in 3 Years: 36 x $500 = $18,000
Mortgage Needed After 3 Years: $383,150 - $18,000 = $365,150

At the end of the three years, you will have $11,850 from the deposit and $18,000 from the rent credits to apply toward the purchase price of the home, and you will have to get a mortgage for the remaining $365,150. If you choose not to buy, you will lose the deposit and the rent credits.

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