Rent to Buy

What is ‘Rent to Buy’ ?

‘Rent to Buy’ is an option to buy a property  for a fixed price at a set point of time in the future.  The property purchase would take place usually over a long settlement period of anywhere between 6 months to 4 years.

This legal agreement between you and the owner gives you the right, but not the obligation, to purchase the property at the agreed set date in the future. Once in place, the property will no longer be for sale and you are the only one who can buy the property until the option expires.

 As the buyer you can exercise your right or ‘Option’ to buy at anytime during the option period. The  buyer should let the owner know that they intend to follow through and to buy before the Option expires.

 With this in mind -  you can register or lodge a  ‘caveat’ on the property so that the owner, the owners estate and anyone else with an interest in the property, recognise your rights.

‘Rent to Buy’ is a long-established technique to assist people to  purchase property on a low deposit.  It is becoming increasingly popular as house prices have stayed relatively high and banks have become increasingly tight.

Who Can Apply?

Anyone who can relate to the following;

  • $10,000 or less deposit*
  • A bad credit report
  • Ex-Bankrupt
  • Self Employed
  • Permanent, Full Time or Part Time Employees
  • Any First Home buyers
 * conditions apply for deposits under $10,000
 
What is the benefit to the Property owner?

In a flat real estate market many property investors with investment homes that are negatively geared often have no choice but to sell at sometimes heavily discounted rates. With your ‘Rent to Buy’ Option in place the Seller gets to sell for their asking price in exchange for a long settlement period. ‘Rent to Buy’ definitely offers them a better price than they could possibly get at today’s discounted market price.

 The owner will get immediate cash flow in a small upfront deposit – as per agreement.  This is usually around *$10,000.  Additionally, the lease arrangement is designed to create a positive cash flow to the owner for the ‘Rent to Buy’ period.  A buyer will be paying the property owner each month  above market  rent, which includes  a ‘cash back’ credit component to the buyer.  This is more than they would get for  an average rent  and gives them the positive cash flow they need to cover the costs of the property.

They will no longer have any tenant worries as a buyer will be treating their home with the respect and care they treat their  own home. It is a great  outcome for both parties.

Summary:

  • Leasing with an  ‘Option to Buy’
  • Tenancy agreement in place
  • Leaser/Renter pays mortgage size repayments
  • Includes a cash back credit to leaser/renter
  • Longer settlement period
  • No obligation to buy
  • Small deposit – may be non refundable
  • Title stays with owner
  • Caveat protects buyer
  • Tenant can exercise option to buy anytime during the option period
  • Improvements can be made prior to settlement with owner’s permission
  • Authorised improvements can be claimed as ‘credit’ back
  • Legal contracts signed on agreement

The Basics…
What you need to know

  • A standard residential lease (Residential Tenancy Agreement) is used to give possession to the Purchaser
  • The purchaser pays rent under the lease
  • The purchaser  signs an option to purchase the house in 2 or 3 years(eg), at a fixed price up front
  • The purchaser pays for the option, by paying an up front (deposit) and ongoing option fees(credit back)
  • The purchaser’s payments(option fees) are credited (as debited) against the price payable under the Contract
  • The purchaser may earn credits using  ‘sweat equity’, by carrying out work on the property

Summarising the major benefits using ‘Rent to Buy’

  • Any accrued equity in the house price will benefit you at settlement
  • Our First Home Buyers ‘Rent to Buy’ program can be established with a low deposit – as little as $10K or under *
  • You get to start paying off YOUR house – straight away
  • An agreed ‘cash  back’ program is put in place to create savings on your future loan
  • The program is backed with a legal agreement which secures your intention to buy the house at a later date
  • The house will be off the market and immediately puts YOU in your own home quicker.
  • Your deposit PLUS above rent  payments will be included as a part payment or  ‘credit back‘ on settlement
  • With ’Rent to Buy’ you are able to renovate the house from day one (with the owner’s permission).
  • Self-employed individuals, new citizens to Australia, those who do not have a valid savings record and those with past credit issues are able to become Home Owners through our ‘Rent to Buy’ programs.

 *  conditions may apply for deposits under $10,000

 Are you Interested in Rent to Buy

Contact us!