Many families today struggle to scrape together the funds necessary to buy, thus rent to own in Sydney has overwhelmingly become a solution. Renting with the option to buy is a good alternative that allows potential home buyers to invest part of their monthly rent towards the possible purchase of the house.
Rent to own has been around for decades, and benefits both parties: for the tenant because they can live at the property, renting for a specific time while investing in a possible purchase, and for the landlord, because, while the tenant does not buy immediately, he is receiving rental income with a premium as insurance.
The agreement is a double or mixed contract,consisting of two subcontracts, one for rent and one for sale. But it does entitle the tenant to buy it for an agreed upon price, and if the tenant decides not to buy, they are not entitled to recoup any of the money.
The contract will include the decision to acquire the dwelling by the tenant, after a number of rental years, and the stipulated sale price for the dwelling at the time of signing the contract. It also includes the amount of the rental installments and the percentage to be deducted from the rent. For that reason, it is very important that all the conditions are very well specified in the contract.
– Term during which the tenant will be renting the dwelling
– Term during which the tenant can exercise their right to purchase
– Amount of the monthly rental income
– Who is responsible for any additional expenses
– The willingness that the landlord will sell the house to the tenant
– Sale price of the home
– Percentage (fixed or variable per year) of the rental installments made by tenant, up to the time of the purchase, and amount to be deducted towards the sale price
There are also several conditions and exceptions, for example, owners typically include in the contract clear language stating the premium and the fees invested in the rent will be lost if, when the time comes, the tenant does not exercise the purchase option. This is a way to ensure that the tenant is really interested in buying the house, and not wasting the owners time. The contract will also typically state that the tenant has the right to remain leased in the home during a set period of time, like 5 years.
Also, the price of the sale can not be modified neither by owner, nor by tenant, so it’s important to agree to this sale price before moving in.
In short, rent with option to buy is a type of contract beneficial to both parties as long as the contracts are acceptable to everyone.