Rent-to-own involves a renter both paying rent and contributing to the down payment. Often in a rent-to-own scenario, a company buys the home for the renter and then rents it back to the renter.
Rent-to-own companies help buyers access homes for sale earlier. While a renter is saving up for their down payment, they can start living in the property they want to buy.
Rent-to-own companies generate revenue from rental income. They also capture appreciation in the value of the home when they sell it back to the renter. Agent referral fees are an additional revenue stream. Rent-to-own companies typically have a cap on how much a renter will have to pay to buy the home. That way, if there is a limit on how much the price of the home can increase for the renter to buy.
Traditional rentals are wholly owned by a landlord and are not intended to be sold back to the renter. This means that rent goes towards funding property management and investment returns. Rent-to-own companies are able to make money on the sale of the home as well as referral fees from agents. This allows these companies to lower rental fees. Additional income can then go towards the renter's down payment on the home.
Landis, Divvy Homes, and ZeroDown are all rent-to-own companies. Many have some component of fractional home ownership. But they typically buy a home on behalf of the renter and then rent it back to the renter. The renter can contribute toward the down payment as part of the rent.