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What are the usual terms of a “rent with an option to buy” situation?
While the other people have tried to answer your question as thoroughly as possible, I fear they are entirely incorrect in answering your question itself as it stands. The answer is that there are no usual terms. There are a handful of different options coming out now for this exact scheme. Examples include the UK Governments "Help To Buy" scheme. Accomodation is offered at a normal rate, and a small portion of the rent is set aside each month. At the end of a fixed period, that money becomes a deposit which the letter hands over to a mortgage provider who accepts it as a deposit. This might well be a terminology thing, since the other scenario which people described falls into the same name you've used. That scenario is where the investor who owns the property is considering sale of the property, and is happy to negotiate a price up front for the next year. Usually the rent and price is higher than the market rate because if the market goes well over the next year they could end up out of pocket. Putting that into perspective, over that year they are gaining their $1,000 a month or so, but having $100,000 invested means a return of 12%. If the property value is over $250,000 which I believe to be more likely, they are achieving a return of (I think) 4.8%. That's not a bad rate, by any means, but realistically they are losing a bit more for maintenance, and they could be making more from their money. If the market were to go up in that time by more than 4.8% (my house, for instance, increased in value by over 15% in the last 12 months), they are making a substantial loss since you are getting a house at 15% below the market rate. The total works out to a 10.2% loss for them. Note that I don't know the US housing market at all, I'm speaking mostly from my experience of the market here in the UK. This is what I hear, what I see, and what I've played. To summarise a bit: Make sure you check your terms before signing anything.