This arrangement represents a contractual agreement where an individual occupies a small dwelling while making payments that contribute towards its eventual ownership. The agreement typically outlines a lease period during which the occupant pays rent, with a portion of each payment allocated towards the purchase price of the dwelling. For example, an individual might lease a compact home for a specified term, with a percentage of the monthly rent accruing as equity towards its future purchase.
This structure provides a pathway to homeownership for individuals who may face challenges in securing traditional mortgage financing. It offers a period to build credit, save for a down payment, and assess the suitability of the residence before committing to a full purchase. Historically, this approach has served as an alternative route to property acquisition, particularly during periods of economic instability or when access to credit is limited.