Rent-To-Own vs. Buying a Ready for Occupancy Condo

Mar 15, 2022

When it comes to making investments, there is no better choice than real estate. Real estate investments usually never depreciate and can be a source of income, providing exceptional returns. Moreover, they offer excellent facilities and features that are tailored to one's ideal lifestyle. They are also frequently located in great areas, close to everything their tenants would want - a perfect place to call home.

The number of condominiums in and around the Philippines' major cities is steadily growing. If you are in the midst of condo hunting, you might encounter the dilemma of choosing whether to purchase a ready for occupancy condo or sign up for a rent-to-own program. Sure, it can throw you into confusion, but this guide will walk you through the pros and cons of each.

Rent-to-own and RFO condo programs, like anything else in real estate, have their own advantages and disadvantages, and it's essential to open your eyes to these as you enter into the transaction because if things don't always go as planned, there are several risks you have to be aware of.

What is Rent-to-own Condo?

Rent-to-own (RTO) condo programs are typically targeted at individuals who are unable to qualify for a mortgage or who lack the necessary money for a down payment. 

A rent-to-own agreement is a contractual arrangement between a tenant and a property owner or developer that allows the tenant to purchase the rented property within a certain time frame before the lease contract ends. 

The Benefits of Rent-to-own Condo

There is no need for a down payment.

By choosing to RTO rather than buying a condo, you will save money on the down payment and other costs associated with property ownership. You're freeing up cash to spend or invest elsewhere.

You can ‘test-drive’ the property.

By living in the condo you're renting, you'll be able to give a general idea of the property; for example, you'll be able to identify existing and future maintenance issues that may influence your purchasing decision in the future.

The Downsides of Rent-to-own Condo

Monthly payments are higher.

Since there is no upfront down payment in the RTO arrangement, it means you will have to pay a larger monthly rental. If you later decide not to purchase the property, all of your payments will be forfeited, and you will not be eligible for a refund. Most condo owners who offer RTO arrangements have stricter payment policies, so you'll have to be extremely careful or the contract will be canceled.

There are financing risks in the future.

The monthly rental price is high and while you may have a strategy in place to finance monthly payments remember that things may not always go as planned in the future.

The condo is still under the owner’s name.

In Rent-to-own condo is still under the owner's name, and there's a danger it may be foreclosed if they don't make their mortgage payments. If you suddenly sustained significant financial losses that required revocation of the contract, you may no longer refund any of what you have paid. You run the danger of losing whatever savings or equity you've invested in the condo.

What is an RFO Condo?

RFO condos, or ready for occupancy condos, are condo units that you can readily move into as soon as you sign the contract and make the required payments. This is perfect for families and individuals that are relocating, as well as expatriates, foreigners, and immigrants.

The Benefits of RFO Condo

You can maximize your investment.

Investing in an RFO condo is a wise decision since you can generate money in a variety of ways: you may sell it or rent it out short-term via Airbnb or long-term. One of the quickest methods to make money is to rent it out on Airbnb. You can market it on the internet, advertise it, and be ready to cater to both staycationers and visitors.

Owning a condo gives stability and freedom.

Purchasing an RFO condo provides security since there is no risk of being evicted by a landlord. Also, living in your own condo also gives you the freedom to refurbish and decorate it in any way you see appropriate.

The Downsides of RFO Condo

RFO condo requires higher upfront expenses.

You will need to qualify for a mortgage and has to pay other upfront expenses, such as property taxes and homeowners’ insurance.

There is greater financial responsibility required.

Aside from mortgage and taxes, you will be responsible for all expenses connected with homeownership as a homeowner. You'll also be responsible for repairs and maintenance on the condo property.

Rent-to-own vs RFO condo

If you are someone who is hesitant to make long-term commitments, with a tight budget who finds the idea of buying a property scary, owning a property through a rent-to-own arrangement is considerably more practical. It is ideal for buyers who cannot afford to pay a large down payment all at once. 

Sure, an RFO condo can be more expensive, but you'll be certain of the property's quality and that there will be no unpleasant surprises along the way. It can also be invigorating as it will give you the freedom to do whatever you want with it, such as change the paint colors, replace the carpet, renovate and refurnish, and have as many pets as you want, and so on.

If money isn't an issue, the only thing left to worry about is finding the best condo for your lifestyle. Because apart from the higher upfront expenses, there is nothing negative to say about RFO condos; you may even start your own rental business once you have a unit. There are many options depending on the needs of the client from studio, one-bedroom, two-bedroom, 3-bedroom, or even a penthouse

Between rent-to-own or RFO condos, there is no clear winner. Eventually, you must determine what best meets your needs and lifestyle. Other factors to think about include your financial capacity, lifestyle, family requirements, investing goals, and risk tolerance. To assist you with your decision, it is a good idea to perform research and talk with an expert beforehand. 

You must carefully consider the pros and cons of purchasing an RFO condo or signing up for a rent-to-own arrangement to minimize losses and grasp the dangers and rewards of each because housing is more than just a need; it has an impact on every part of your life.

If you are thinking of moving into a new condominium, check out Vista Residences!

Vista Residences is the condominium arm of the country’s largest homebuilder, Vista Land & Lifescapes, Inc. that offers ready for occupancy and pre-selling condominium projects in Manila, Makati, Mandaluyong, Quezon City, Ortigas, Baguio, Cebu, and CDO that are strategically located within major cities, in close proximity to premium universities, transit-oriented locations, and developed business districts.   

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.

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