The Rent To Own Property Strategy

 

How does a Rent to Own Strategy work

A Rent To Own agreement involves a lease, much the same as a standard rental tenancy agreement. The difference is that on or before the end of the agreement, the renter has the option (but not the obligation) to buy the property. The weekly amount the renter pays may be similar to the amount you would make when paying off a principle and interest (P&I) loan for the same property. A proportion of the weekly payment then contributes to the purchase price when the renter buys the house. Should the renter choose not to purchase the property, they generally will not get back their full contributions.

Advantages for the seller

The advantage to the seller is that they can achieve much better cashflow in the short term. A vacant, un-tenanted house is losing money everyday. A Rent to Buy arrangement can provide money (positive cashflow) for the owner on top of mortgage payments, rates etc. The owner also has a fixed price that they can sell the house at, reducing the need to find a buyer and negotiate the price down the track – and should the renter not purchase at the end of their lease, they can simply rent it again.

Advantages for the buyer

The benefits for the buyer are that they can “try before they buy”. They can move into their home paying no stamp duty upfront with the comfort of knowing they can buy the house at any time during the rental period. When they decide to “buy” they don’t need to move again! If they decide they don’t want to buy the property after all, the costs are much less than they would have been to have bought and sold the house.

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