The real estate business has applied rent to buy techniques to attract more clientele. This marketing strategy gives the flexibility to the tenant to first stay on a rental basis, and at a later stage buy that property.
This transaction is also referred to as a lease-purchase system. The renter pays the option fee, which ranges from one to five percent of the sale price of the house. The tenant pays a fixed sum of money as rent and also an additional amount goes towards the purchase price of the property. Once the period of the rental agreement ends, the renter has the option to buy the property outright on payment of balance amount. If he fails to do so, the additional amount paid towards purchase price is not refunded back to him.
The greatest benefit to this arrangement is that renter is allowed to pay smaller amounts of cash in the initial stages of the transaction. Buyers prefer to go for a contract without having to involve banks and financial institutions. Moreover, they also have the flexibility of owning the rights to the property once the period of the agreement is completed. It is definitely cheaper to first rent out the property and later on purchase it, rather than buying the property by making full payment. Under rent to buy scheme, the rental payment remains the same, irrespective of the increase in the interest rates. Moreover, the costs towards maintenance and repairs are borne by the landlord as he is the one who has the ownership rights for the property.
A noteworthy benefit of this arrangement is that the renter obtains a secure home even if he does not have a good credit score, and he gets time to build a good credit score and also opt for finance schemes to buy the property.
The financial risk involved with rent to buy schemes could be one of its drawbacks. If the buyer does not exercise their right to buy the property towards the end of the period, he loses out on the rent as well as the amount paid towards purchase option.
This form of transaction offers both advantages and disadvantages. One should consider everything as a buyer and then address the issue accordingly. This agreement is becoming increasingly popular in the real estate business, thanks to the flexibility and the convenience, and the fact that the charges are not too high. Moreover, one still has the choice of purchasing the property at a later date. Also, one need not necessarily possess a strong credit score.
A rent to buy scheme is also ideal for people who do not have funds to effect payments towards the property. However, make sure to exercise caution when you enter into this kind of agreement. If you are not comfortable with the clauses, then you could always hire a professional to understand the agreement better. This would save you from many a hassle in the future.
Last but not least, this method is indeed a smart investment and a good starting point to owning your own home.
Author Resource:-
Gallions housing Association offers rent to buy housing in London and the South East. Find out more about our rent to buy scheme today.
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