A rent-to-own contract is a good option for prospective homebuyers who need time to save for a down payment or secure a loan, and gives owners an opportunity to earn a return on their property while waiting to sell it, according to online property advisory and listing firm MyProperty.ph.
Rent-to-own benefits homebuyers, particularly first-time homebuyers, who have not yet saved enough to make a down payment, or who have less than perfect credit or employment history, MyProperty explained.
For property owners, a rent-to-own contract potentially has several benefits. Most significantly, it allows the owner to earn at least a small return on property that might otherwise be unoccupied as it waits for a buyer.
A rent-to-own contract can be more profitable than a regular lease because a common practice is to charge a premium monthly rent; for example, a small house or condominium unit that might only rent for P7,000 a month based on prevailing rents in the area where it is located could be rented for P9,000 on a rent-to-own basis, with the extra P2,000 per month being applied to the prospective customer’s eventual down payment.
And since the down payment portion of the rent is non-refundable—a common feature of rent-to-own arrangements—the property owner has some security that, if the sale does not proceed, he will not be left with a property that is a fewer years older and has not generated any real income.
The benefits to the resident are that it allows a period of time in which he can improve his personal finances while reducing the eventual down payment and total price for the property to some extent. It also allows the prospective homeowner to “try it before buying it,” to see if the property and area where it is located is really suitable for his family’s lifestyle and needs.
As with any real estate contract, MyProperty.ph reminded owners and lessees to take time to ensure that all relevant terms, such as whether pets will be allowed, whether the property can be renovated, and who is responsible for repairs, are included in writing, as well as terms such as the monthly rent, the date when the renter should decide whether to buy the property, and the selling price.