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Attractions of the Rent-to-Buy Market

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By : Melissa Chappell    99 or more times read
The concept of rent-to-buy schemes is not new, yet in the current real estate climate their attraction and availability is starting to generate a renewed interest. The process of the scheme is very self explanatory, yet several issues need to be considered prior to entering into a contract.

Essentially potential buyers enter a rental contract, with the intention to purchase the property at the end of a specified time period. The monthly rental payments are then taken into consideration to use in part or entirely towards the purchasing price of the property.

As the majority of real estate has been positioned in a seller’s market for most of the past decade, rent-to-buy schemes have not been successful, as they were not beneficial to both parties involved. The current market situation is seeing many properties spending excessive amounts of time on the market, leading to sellers becoming desperate to consider alternative options to achieve a sale.

Buyers are also looking for ways to improve credit ratings, enabling access to financing to purchase homes while the prices are more affordable than they have been in years. The rent-to-buy scheme has re-emerged during an ideal climate to succeed.

Slowly gaining awareness in various markets across Europe, the majority of offers are coming from developers with an excess of properties they have been unable to sell.

Receiving a rental income for a specified timeframe, often between 6 months and 4 years depending on the location, enables owners to have a positive income flow with a strong possibility of a sale.

Potential buyers receive an ideal ‘try before you buy’ opportunity, without the feeling of losing money on the rental market. Tenants are also more likely to keep the properties in excellent condition with the intention of purchasing at the end of the contract.

Buyers that have been unable to receive mortgage financing, benefit with the ability to prove their continued capacity to make payments on time. Improved opportunities for financing are also gained from having already paid a good percentage of the required deposit for the property.

Making arrangements with a financial advisor prior to entering into a rent-to-buy contact can ensure that correct calculations are carried out, knowing the likeliness of obtaining the necessary financing at the moment to purchase.

In some countries, governments are offering rent-to-buy schemes in an effort to improve the real estate sectors.

Benefits from government incentives include monthly rental at discounted percentages from the general market prices, although private sellers are more likely to offer rental at slightly higher than market prices. The monthly costs will be determined by the opportunities available in each individual region.

Contacting a private seller to enter into a rent-to-buy scheme, rather than use the services advertised from agents or developers may not be successful. Owners who have been unable to sell their property on the open market may be receptive to offers, yet an initial deposit may be requested. The deposit is unlikely to be refundable in the event of a non-sale at the end of the rental contract.

Depending on the market, different schemes are available. Generally the best deals can be obtained from the shortest length of the rental contract. While not all markets offer the same deals, consideration should be made to ensure the deals being sought are suitable for the buyer.

The limited success in the past of rent-to-buy schemes has been attributed to being offered at the wrong moment in the market. With the current world economic climate, severe decline in real estate over the past two years and predictions of lengthy recovery periods in certain regions, it appears the moment has arrived for successful prospects with rent-to-buy opportunities.
Property Investing Overseas provides extensive experience dealing with and on behalf of investors throughout the world, offering unbiased information on portfolios and international markets. Our experience within the global property sector enables us a prime position for identifying professional agents and developers, ensuring our clients receive full knowledge prior to entering any property investment purchase with our collaborators.

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