I have over the last couple of weeks have been asked about Rent to Buy on some properties I have been marketing. This is something that I haven’t been involved with before so I had to study it a little myself. Rent to buy can be a great way for your family to get into your dream home without crashing your families finances. It is not a new concept although I think there may be more of this type of transaction taking place considering the state of the market and interest rates.
Rent to Buy can be a great plan for anyone but more specifically it is a great opportunity for those with blemished credit or who are low on cash for a deposit. Or it can be the perfect situation for the handyman that can trade his skills for a down payment on a home, or any other situation that is hard for a buyer to get a deposit ready.
It is important if you are looking to Rent to Buy that you are aware of the pitfalls that might occur. This can be a great option to get you in a home faster but there can be a downfall. In a Rent to Buy situation you are entering into a contract. It is important to carefully read the contract. There have been cases mainly from overseas where the sellers are evicting rather than selling and making even more profits from the home.
In a Rent to Buy contract you will be paying a little higher rent or a little more than a mortgage would be. This is because you will be paying the normal renting fee plus an option to buy fee. Typically this fee and possibly even a portion of the rent will go towards the price of the home. The seller will give you a time frame as to when you must be able to secure a loan to buy the property. This time frame is usually a 3-5 years. This will give you ample time to repair your credit and even save a larger down payment. If you are unable to secure the loan at the end of that time period than all fees collected during the time period stay with the seller and are a loss for the buyer. So basically you are betting that you will be ready to buy a home in 3-5 years when you enter into a Rent to Buy contract.
I have a few clients that are doing the Rent to Buy for their friends or people they have found that can’t quite afford to service a loan at this time. I think it’s a good option for some people if the sellers are ok with the terms of the contract. I believe that the market has changed and that the conventional ways of selling houses are not so much becoming less effective but with new waves of buyers in the gen Y generation I think that new ways of getting people into homes is needed, and I feel that Rent to Buy might play a part to this as well as social networking and other things.
6 thoughts on “Rent to Buy”
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Another way that can be done is that you buy a quarter or half the house and rent the other three quarters or half. When you can afford it you can buy another quarter or half at the current market price. If you want out the house gets sold at an agreeable price for you and your landlord and you get your quarter/half. For the landlord it is a great deal as all the property maintainence is done by the ‘tenant’ as they should be the ones that eventually own it outright.
i have been ripped off on 2 x rent to own
1, easy own homes
2. howard pacific finance company.
they do not work out and dont get involved with them
Thanks for your comment Jeff. Just like anything a rent to buy scheme has pro’s and con’s. You need to evaluate if it will work for you or not and make the call whether to get involved. For some people its a way in for people to one day own a home but as you say you need to be sure you know what your getting into and make sure you have a way out that protects your interest in the property.
Hi there, I am about to Rent to Own a home with Rent to Own New Zealand, I have read the pros and cons of the company and do understand the actual process, I have made it clear my affordability with the deposit as well as the weekly payments, I feel that it is the most important thing to consider before renting to buy my own home, I understand I have not met the requirements they are wanting but am wanting to stick to my affordability, so I am quite happy at the moment.
Regards
Lavinia
I have a rent to buy house. It is an easy to understand contract and I am fully aware of the pitfalls. Mainly one that if I choose to end the contract I forfeit the principal sums to date. Other than that its great. The person I have bought off has done rent to buy for years and owns hundreds of properties and is very helpful when times are tough. I don’t live in my home I have it for investment purposes and it costs $70pw.It pays to go with someone reputable. I have 5 years to secure a mortgage. If not the lender helps me. I can also extend or even pay it off early without penalty. It works for me. He also sells to investors starting out. No deposit terms.
Nicola – does that company work in the Wgton area? They sound prety reasonable.