Not Financial Advice: Though there are variations, the most basic lease-with-option-to-buy arrangement works like this: a potential buyer signs a lease to rent a home they are interested in, with the lease usually running two or three years.
During that time, the landlord/seller sets aside part of each month’s rent payment into an escrow account. When the lease is up, provided the payments have been made in a timely manner, the renter can use the money in the escrow account as a down payment to purchase the home outright.
In another variation, the owner may decide to sell the home to the renter at a discounted price, stated in the agreement, when the lease expires, rather than putting money into an escrow account.
You can sometimes put together a rent-to-own arrangement by making an offer on a home listed for a conventional sale, but you’ll more often find them advertised as such by owners who’ve decided to go that route. Some companies even specialize in marketing rent-to-own properties.
Check out some tips on renting out a home with the option to buy at Homeguides.sfgate.com.