Sell now, or sell as rent-to-own?

How the comparison works

Both paths end with the home sold. The difference is when, to whom, and what you collect along the way.

Selling today is the market value, less the agent’s commission, legal fees and the mortgage balance you would pay off. Because that money arrives now, it is assumed to be invested for the same years the rent-to-own would run, so the two are compared at the same point in time.

Rent-to-own is the rent and option fees you collect, less your mortgage payments, property tax and other costs, plus what the tenant-buyer pays you when they complete: the agreed price, less the option credit they have built up, less closing costs and the mortgage balance then owing. The cash flow earns the same return once it is received.

The comparison is shown for every year the buyer could complete, because the answer can change with time. A short term can favour selling today; a longer one gives the rent and the price growth longer to work.

When rent-to-own tends to come out ahead

• The rent covers the costs. Positive cash flow every month is the steadiest part of the return.
• Commission is a large cost. A sale to a tenant who already lives in the home usually has no agent, so that saving goes straight to what you keep.
• The option price is set above today’s value, or rises at each renewal, and the buyer is likely to complete.
• The home has been slow to sell. Selling today assumes a buyer at market value now; rent-to-own trades that uncertainty for a price agreed at the start.

When selling today tends to come out ahead

• The rent does not cover the costs. Every month of shortfall comes out of your pocket until the sale.
• The option price is at or below today’s value. You would be waiting years for a price you could have now.
• You need the money now, or could put it to work at a higher return than the one assumed here.

If the buyer does not complete

A tenant-buyer has the right to buy, not the obligation. This comparison assumes they complete. If they do not, the home remains yours, and what happens to the option payments already made depends entirely on what the agreement says.

A deal is best judged on the assumption that the buyer succeeds. Terms that give the tenant-buyer a realistic path to a mortgage by the end of the term are what make the numbers above come true. The guide explains what happens if the buyer can’t buy, and how renewal terms extend the runway.

Questions sellers ask

Why is the money from selling today grown by an investment return?

Selling today puts the proceeds in your hands now, while rent-to-own pays out over several years. Money in hand sooner can be invested, so comparing the raw amounts would understate selling today. Both paths are therefore assumed to earn the same return on money once it is received. Set the return to 0% under More assumptions to compare the amounts alone.

Is the option price the same as the market value?

Not necessarily. Market value is what the home would sell for today. The option price is the purchase price agreed with the tenant-buyer at the start, and it often sits above today’s value. This page starts the option price at market value, the cautious case for rent-to-own; change it under More assumptions if your deal sets it higher.

Is there a commission on a rent-to-own sale?

This comparison assumes none on the rent-to-own side, because the buyer is already living in the home. Selling today assumes a typical agent commission, which you can change. If an agent is involved in your rent-to-own deal, add their fee in the full calculator.

Are taxes included?

No. Capital gains and principal-residence rules differ between countries and between sellers, and they can change the comparison in either direction. Treat these figures as a before-tax planning estimate and check your own position with an accountant.