If you’re like most homebuyers, you’ll need a mortgage to pay for your new home. And in order to qualify, the usual requirements that you have to comply with include having a good credit score and cash for a down payment.
There is an alternative, however, which is a rent-to-own scheme, wherein you rent a home for a certain amount of time, with the option to buy it before the lease expires. Rent-to-own scheme usually consists of a standard lease agreement and an option to buy.
Rent-to-own condo home agreements are a traditional way of leasing a property while having the option to buy the same property in a certain period of time. The seller of the property remains the owner and still has the full rights until the buyer fully pays for the property.
A rent-to-own option can be a good chance for buyers who do not have enough funds to buy a home or someone who lacks a good credit score. It allows the buyer to earn money to pay for the downpayment and decide if he or she decides to buy the property in the future.
According to most property sellers who are into the rent-to-own scheme, the timeframe for renting is around 1 to 3 years depending on the buyer and seller’s negotiations.
Here’s a quick guide of what to watch for and how the rent-to-own scheme works. It’s complicated compared to the regular renting scheme since you have to figure out if the deal is a good choice if you’re looking to purchase a home.
Nonrefundable Upfront Fees
If you are the buyer in a rent-to-own scheme, you pay the seller a one-time, usually non refundable, upfront fee called the option fee, which is what gives you the option to buy the property like a condo unit after a few years time. There is no standard rate for an option fee and it is often negotiable, usually 1-5% of the total price.
Lease-Option vs. Lease-Purchase
There are different types of rent-to-own contracts, with some being more buyer-friendly and flexible than others. Some would offer a lease-option contract which give you the right, but not the obligation, to buy the home when the lease expires. If you decide not to buy the property at the end of the lease, the contract simply expires, and you can walk away without any obligation to continue paying rent or to buy.
If you are purchasing a property on a rent-to-own scheme, it is still best to have the contract reviewed by a qualified real estate lawyer before signing so you know what you are getting into.
Lease-purchase contracts, on the other hand, would oblige you to buy the home at the end of the lease, whether you can afford to or not.
Agreeing on the Purchase Price
Details on the rent-to-own agreements should include all pertinent details. It should specify when and how the home’s purchase price is determined. Depending on your agreement with the seller, you can both agree on a purchase price when the contract is signed.
Determining a purchase price years before the market as a whole progresses can be a very tricky step for a seller, yet a very good option for the buyer. Buyers always try to keep the purchase price low at the beginning of the contract in order to have a more realistic chance of buying a real estate property that could rise in value later at an affordable price.
Purchase prices in rent to own contracts seem to always favor the buyer considering how the real estate market is going recently. The market is booming, and prices of houses are rising, making this real estate strategy a good option for investors.
Test the Property
By leasing a rent-to-own property, you have the chance to actually live in it and inspect the property to be able to come up with a good decision. Later on, you have the option to leave the property if you find any problems with it.
Applying Rent to the Principal
In this scheme, you will pay rent throughout the lease term. The question is whether a portion of each payment is applied to the eventual purchase price.
Typically, the rent is higher than the going rate for the area to make up for the rent credit you receive.
Rent-to-Own Home Maintenance
Depending on the terms of the contract, you, as the renter, may be responsible for maintaining the property and paying for repairs.
This is usually the landlord's responsibility so you should read the fine print of your contract carefully. In some instances, sellers still shoulder the homeowner association fees, taxes, and insurance, since technically, it is still their house. But this may vary, depending on your agreement with the seller.
You have to make sure also that the maintenance and repair requirements are clearly stated in the contract. Whether you’ll be responsible for everything, it is best to check the property and make sure that the property taxes are up to date before signing anything.
Buying the Property
The rent-to-own agreement specifies what will happen when the contract ends. If you have a lease-option contract and want to buy the property, you’ll probably need to obtain a financing scheme in order to pay the seller in full.
Meanwhile, should you decide not to buy the property or are unable to secure financing by the end of the lease term, the option expires and you move out of the home, just as if you were renting any other property.
If you have a lease-purchase contract, you may be legally obligated to buy the property when the lease expires. This can be risky especially if you are not able to secure a mortgage.
Lease-option contracts are preferred by property renters and buyers because of its flexibility and lesser risk of getting sued if you are unwilling or unable to buy the home when the lease expires.
Just like buying any property, you should follow the process as you would if you were to buy a home. You should do your due diligence, research the area, compare prices with other nearby homes, check the contract, and research the seller's history.
The Rent-to-Own Candidate
A rent-to-own agreement can be an excellent option if you’re an aspiring homeowner but are not quite ready yet, financially speaking.
Such agreement gives you the chance to get your finances in order, improve your credit score, and save money for a down payment while securing the property you would like to own.
What You Need to Remember Before Signing the Contract
Before signing the contract, there are necessary steps that you need to take to make sure you will not be in trouble purchasing the property in the future.
Choose the Right Terms
Before entering into any agreement, it is best to research the rent-to-own options available and the implications it may have on you in the long run. It is better to enter a lease-option agreement rather than a lease-purchase agreement for flexibility and less risk.
Get Help
Once you have the options, you can seek help from a qualified real estate lawyer to explain the contract and help you understand your rights and obligations as a buyer. At this point, you may consider negotiating some points before signing or avoid the deal if it's not favorable to you.
Research the Contract
Before signing any document, you have to make sure that you understand the contract and what it states.
- The deadlines and timelines
- The option fee and monthly rent payments and how much of each applies toward the purchase price
- How the purchase price is determined
- How to exercise your option to buy
- If pets are allowed in the property
- Who is responsible for maintenance, homeowner association dues, and property taxes, among others.
- What is included in maintenance of the property
Research the Property
You have to know the property you’re planning to buy, so it is best to conduct a property inspection, make sure that the property taxes are up to date, and ensure there are no unsettled balances on the property.
Research the Seller
Aside from checking the property, you also have to check the seller’s credit report to look for signs of financial trouble and obtain a title report to see how long the seller has owned the property. As property experts would say, the longer the seller owned the property and the more equity, the better.
Double Check the Contract
You have to be very sure of the details indicated in your contract. There are instances wherein you are required to pay fines if you are late on just one rent payment or if you fail to notify the seller in writing of your payment delay.
Not everyone is financially capable of buying a real estate propertythe moment he/she starts looking for one. Rent-to-own allows a person to begin building equity in a home they like without having to apply for a financing scheme or pay a large down payment. This can be especially beneficial for those who do not have the financial capability yet to make a down payment due to lack of savings or qualify for a mortgage due to low credit scores.
The said concept works in a contract form, where the renter agrees to lease a property with an optional purchase that can be activated before the expiry of the lease contract. This gives the renter enough time to work towards saving enough money or improving his/her credit score to be able to purchase the property for the price agreed upon beforehand.
A rent-to-own contract allows aspiring home buyers to move into a property right away, with several years to work on their savings or a down payment before applying for financing.
Nowadays, when you plan to invest in a property, you now have the option to acquire one at a flexible and advantageous scheme. One of which is the rent-to-own scheme which is an alternative to the traditional way of purchasing a house without the immediate turnover of rights to the property. It has a number of pros and cons and it is your responsibility as the buyer to evaluate each one.
Vista Residences is the condominium arm of the country’s largest homebuilder, Vista Land & Lifescapes, Inc., which offers ready for occupancy and pre-selling condominium projects in Manila and Quezon City that are strategically located within inner-city areas, in close proximity to premium universities and developed business districts.
At Vista Residences, unit owners can take advantage of the property’s centrality. The properties of Vista Residences are strategically located near the country’s premium universities and CBDs, making them an attractive investment for both local and foreign investors.
Vista Residences has ready for occupancy condo projects in Manila such as Vista Taft, Vista Heights, Vista GL Taft, 878 Espana, and Crown Tower University Belt. It also has pre selling projects in the said area which include Vista Recto, Plumeria Heights, Tennyson Heights, Bradbury Heights, Sky Arts Manila, and Kizuna Heights.
Meanwhile, its ready for occupancy projects in Quezon City include Wil Tower, the Symphony Towers, Pine Crest, and Vista 309 Katipunan. It also has pre selling condo projects in the said city such as Hawthorne Heights and Vista Pointe.
Living in Vista Residences enables you to enjoy convenience, where everything is pretty much within walking distance or a few minutes away from the property; comfort because the project features and amenities are designed to deliver comfort at all times, which makes condo living a worthy investment; security that is 24/7 and CCTV monitoring, which makes the residents safe and secure within the property.
In line with Vista Residences’ thrust to offer convenience among its residents, it also features an AllDay Convenience Store and Coffee Project in all its projects.
Vista Residences is part of Vista Land’s roster of vertical housing brands that cater to millennials and young professionals. The other vertical brands include Camella Manors, COHO, and Crown Asia.
For more information on Vista Residences, email [email protected], follow @VistaResidencesOfficial on Facebook, Twitter, Instagram, and YouTube, or call the Marketing Office at 0999 886 4262 / 0917 582 5167.
