Rent-to-buy: a new purchasing method to encourage real estate investments

Rent-to-buy: a new purchasing method to encourage real estate investments

Getting on the housing ladder is now easier thanks to new ways of purchasing property

The global economic crisis has struck the real estate market of many countries in the world heavily. First-time buyers and tenant buyers have found it hard to get on the housing ladder due to the difficulty of having a mortgage approved immediately or of raising a large deposit.

Would-be buyers can now vindicate their legal right to buy a home by choosing a new way to become a homeowner: the Rent to Buy (or Rent to Own) scheme. In a rent-to-buy real estate agreement, the tenant has the option to purchase the property he/she is renting within an agreed period of time – usually three to five years – at a fixed agreed price. This means that the tenant enjoys the benefits of a homeowner without having to worry about securing a mortgage to start the purchase process.

The rent-to-buy option – also referred to as Rent Now Buy Later, Try Before You Buy, Own Now Pay Later or Rent Then Own – is suitable for all those who feel buying a home is out of their reach: for first-time buyers, for those struggling to obtain a mortgage and for those who do not have a credit track record or have a poor credit history and need some time to fix it. This option is becoming increasingly popular also among tenants fed up with paying dead rent money each month. In order to be eligible to apply for Rent to Buy, tenants must be in employment full time and have enough income coming in to be able to meet the monthly payments.

What are the benefits of this new investment option? With the Rent-to-buy scheme, the buyer owns 100% of the property from day one. Outlays to get started are very low and the starter money (deposit) required can be deducted from the final purchase price of the property. Furthermore, should the property value increase, the buyer keeps the difference. When tenants move into the property, they are free to make additions or enhancements to the property as any homeowner. Tenants can purchase a home over a time scale that works for them. Last but not least, entering into the tenant/buyer agreement, there is no obligation to buy the property once the rental period has ended; therefore, tenants can walk away if the circumstances change for them. When the rental period ends, tenants can decide to purchase the property at the price agreed at the outset; if they were just renting the property, they would have paid three to five years rent for nothing. The Rent to Buy allows great savings in comparison with the traditional purchase methods, as the total cost of the due monthly fees is paltry in comparison with mortgage interest rates.

That is the reason why the Rent to Buy option is increasingly attracting the interest of real estate investors who aim at gaining large profits from small investments. Many real estate agencies specializing in Rent to Buy are being set up all around the world, while new purchasing methods - such as buy-to-rent and help-to-buy – are being devised to encourage real estate investments and help would-be buyers purchase their home.

Main source: Affariitaliani

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