By Ken Alltucker
The Cincinnati Enquirer

Rent-to-own contracts allow people to buy houses after renting them a few years. But contract terms can be difficult for the renter-buyer to meet.

This deal was offered in September 2001 by real estate investor Clarence Jones for a house at 958 Mansion Ave. in East Price Hill. It requires the renter-buyer to pay:

• An upfront, nonrefundable fee of $1,000.

• An above-average rent. The renter-buyer would pay $800 a month for two years for the two-bedroom, one-bathroom home. Comparable apartments on the west side of Cincinnati rent for $501, according to brokerage firm CB Richard Ellis.

• Added costs such as rental insurance, utilities including water and sewer, and home repairs. Also, the renter-buyer would pay current property taxes as well as the nine months of property taxes incurred before the contract was signed.

• A high sales price - set at $70,000 in 2001. The option fee and rent payments would be applied to the purchase price. But after two years of renting, the buyer would owe more than $70,000 because payments would be more than offset by annual 14 percent increases in the purchase price. The Hamilton County Auditor's Office values the house at $59,600.

•A high interest rate on the home loan. Jones offered a rate of 11 percent to 14 percent, depending on home repairs made by the renter-buyer. The prevailing rate at the time was 7 percent for a conventional 30-year mortgage.

Soon after signing the contract, the renter-buyer in this case stopped making payments because the roof leaked and sewage backed up in the basement. She was evicted a year ago, and Jones rented the house to another tenant in March.

John Jones, property manager for his father's company, C. Jones Co., says high interest rates and above-market rents are justified because renter-buyers pose a greater financial risk.

He estimates that just 15 percent of people who obtain rent-to-own contracts from his company end up purchasing the home.

Rent-to-own deals have become popular because investors can avoid the hassle of maintenance or property taxes, says Barbara Busch, executive director of a neighborhood advocacy group, Working in Neighborhoods.

The deals also can be perfect for some people who would not be able to own a home any other way, says Vena Jones-Cox, past president of the Real Estate Investors Association of Cincinnati. (She's related to Clarence and John Jones, but operates a separate company.)

Jones-Cox suggests that renters research the sale prices of similar-sized, neighboring homes before making any purchase decisions. Home sale prices can be viewed at the Hamilton County Auditor's Web site (www.hamiltoncountyauditor.org) . People without computers can use the ones at library branches.

Other experts aren't so generous about rent-to-own deals.

"They are set up so the buyer fails," says Steve Olden, a lawyer for the Legal Aid Society of Greater Cincinnati.