Although it is not a common option in our country, some people see rent-to-own as an interesting way to acquire their first home. One of its advantages is the possibility of living in the house or flat before buying it and checking its functionality. If it really suits what we are looking for by location and neighborhood, what are your maintenance costs, etc.
The rental contract with the option to buy is also considered a form of investment in our day-to-day life, since the monthly payments we pay or a part of them are considered on account of the final price of the property. That is, they will be discounted from the final amount at the time of sale.
There are several most common questions about renting to own. However, in this article, from Sky Marketing we explain whether or not it is worth investing in a rent with option to buy.
Advantages of apartments with option to buy for tenants and owners
Although there are different variables of rental contracts with the option to buy, in all cases one reality is clear: the owner wants to sell the property and the tenant wants to invest in a house.
Among the direct advantages of flats with the option to buy, we mainly highlight two:
- The possibility of enjoying the home before buying it.
- Seek financing for buying and selling for a longer time.
In the first case, the tenant can check if the neighbors are to his liking, if there is a lot of noise in the area, or if he likes the neighborhood before making the final decision.
On the other hand, an apartment with an option to buy gives tenants more time to search for the mortgage options that interest them the most.
In addition to these two clear direct advantages, renting a flat with the option to buy has other “relative” advantages.
The first is that, if our work or personal circumstances change abruptly, we have not committed to buying a home for which we may not be able to assume the mortgage. We will simply have more time to assess the real estate transaction.
The only cons is that we can lose this option and, then, the amounts contributed for the purchase will become those of a usual rental. In any case, we will not have to pay compensation or contribute more money if we do not finally buy the apartment.
Set a price
On the other hand, in a flat with an option to buy, we can set the price of the operation at the time of signing the contract, that is, well in advance of the sale. This can be positive or negative, since the amount will not be fixed according to the state of the market.
These are advantages for future buyers, but does the owner get any advantage with this type of rental? The answer is yes.
Flats with the option to buy have tax advantages, especially for the owner, who broadens his range of interested clients and receives a monthly rent without losing ownership of the property. In addition, the tenants will take care of the house, since their intention is to buy it in the future.
Disadvantages of flats with the option to buy
Renting flats with the option to buy presents some cons or drawbacks, both for owners and tenants. The main one is that the purchase-sale price is set in advance, something that can be detrimental to both parties:
Disadvantages of the apartments with option to buy for the owners
Renting flats with the option to buy is an unprofitable formula for homeowners who want to get rid of their home soon.
The reason is that they agree not to sell the property for the duration of the rental contract and, if the sale does not go through, they still do not get rid of the apartment and have lost more attractive offers. Also, if house prices rise after the contract is signed, the owner has no scope to increase his profits. That is, you can lose money.
Disadvantages of apartments with option to buy for tenants
Although it is a good option to “go investing” in the home while paying the rent, if the option to buy is not activated, the tenant loses any premium paid. In addition, flats with the option to buy tend to have a higher rent.
On the other hand, if this time we find an apartment in better condition or with a better price, we will have already committed ourselves, and we may have to wait and miss a good opportunity.
If prices in the area drop a lot in the time that we are rented, we will not be able to negotiate a reduction in the tax price.
The tax burden is another of the great disadvantages of apartments with the option to buy for tenants. He thinks that contracts with the option to purchase are subject to double taxation by the Tax on Patrimonial Transmissions, by rent and by purchase. Thus, when the time comes for the transaction, the property transfer tax to be paid will be the one corresponding to the payment of the full price, even if we have paid a part before.
Am I really interested in a rent to own option?
Renting with the option to buy can be interesting for both owners and future buyers: the former encourages the purchase decision and the latter see first-hand what the home is like before finally acquiring it.
Thanks to the rental contracts with the option to buy, the tenant-future buyer has a certain margin to assume ownership of the property. This can be beneficial for young people who want to access a first home but are currently having trouble getting financing; as well as for people who want to buy a home but do not have savings to cover taxes or mortgage expenses.
In both cases, the rental time gives them room to find a mortgage according to their income or to save with the security of investing that money in their future home. Even so, in some flats with an option to buy it is necessary to advance a small premium that will be lost if the purchase option is not activated.
In the case of owners, offering their apartment for rent with the option to buy is a good idea for those who want to sell a property but are not in a hurry. It is also a good option for those who have been marketing a property for several months but do not receive offers: in this way they maintain the sale offer while making the property profitable.
As always when we are thinking about acquiring a property, before signing a rental contract with an option to purchase it is essential that the future owner obtain a certificate of charges or a simple note in the Property Registry. It is also advisable to consult a lawyer to draft this double contract, be clear about exactly what we are committed to and avoid conflicts in the future.
Are you looking for professional advice to buy a home? Contact Tajarat properties . We are leaders in online real estate services.