Rent To Buy
What is a Tenant Buyer?
A Tenant Buyer is a future purchaser that has the option to purchase a property at an agreed price at an agreed future date, usually 3 – 5 years, during this time they will have many of the benefits of a traditional homeowner without having to obtain a mortgage to get started. The Seller will allow the Tenant Buyer to live in the home as a Tenant before they actually purchase the home from them.
Fed up Renting and want to start Owning?
How it works
• You find a Rent to Buy property you like on our Property Section and arrange a suitable time to go and view the property.
• You like the property and you decide you would like to enter into an Option to Purchase Agreement or Lease option as it is more commonly known. You agree with the seller what period you would like to take the option over and confirm the amount of small starter money, monthly rental fee and any additional monthly option consideration payments.
• The relevant option paperwork is drawn up by Solicitors along with an Assured Tenancy Agreement for the duration of the option.
• You move in and are free to enhance and add value to property during the period as any traditional homeowner would.
• At the end of this period you purchase the property at the previously agreed price and any equity the property has gained is all yours.
• As a Tenant Buyer you are not obligated to purchase the home at the end of your option/rental period.
• The Seller is required to sell the Property to the Tenant Buyer should the Tenant Buyer choose to exercise the right to buy during the option period.
So in the same period a traditional tenant would have paid 3 – 5 years of dead rent money, you as a Tenant Buyer will own you own home... easy.
How long does it take?
You can get into your “Own Home” very quickly, once the relevant paperwork has been signed then we can work around a date that suits you, normally we work to a timescale of around 4 weeks, this gives you the time to pack and sort out things like new schools etc.
How much to get started?
You will need what we at Rent to Buy call some “Getting Started Money” this is an amount of money that will come off the final purchase price, class it as an investment in your future, although each property is different a rule of thumb would be 2% - 5% of the original purchase price.
How much monthly?
An agreed monthly fee is paid by the Tenant Buyer to the Seller during the option period, as well as these payments you can make additional option consideration payments that will reduce the final purchase price or form part of your deposit when you choose to exercise your Rent to Buy Option in future years.
What happens at the end?
At the end of the option period you have a choice.
• You have the option to purchase the property.
• If you choose to exercise your option to purchase the property at the price you agreed at the beginning, your “Option Consideration Payments” and “Getting Started Money” will form part or all of your deposit, you will also retain any additional equity the property has accumulated during the option period, should you choose to purchase.
Example of a lease option
Janet and John find a property they like on the Rent to Buy Website and want to enter into an agreement to purchase the property in 5 years time. This is what happens.
Today's market valuation of the property in 2009 is £100,000.
They will pay £107,000 for the property in 2014.
If the property is worth more in 5 years time, say £125,000 they will keep the extra growth/equity.
They pay £2,995 upfront “Starter Money” (Rent to Buy Deposit) which will come off the purchase price at the end of the 5 year term.
The market rent for the property is £525, they will pay £495 rent per month for the duration of the 5 year term with NO INCREASES.
They can afford to pay an extra £69 “Top Up” per month on top of the monthly rent payment, again, these “Top Ups” will come off the purchase price at the end of the 5 year term.
We will match this “Top Up” pound for pound over the 5 years.
They live in the house for 5 years, treating it like their own home and then the day comes to complete the purchase, this is what happens.
The purchase price is £107,000.
Janet & John need a mortgage for 90% of the purchase price which is £96,300.
They will need a deposit of 10% which is £10,700.
They have the original £2,995 “Starter Money” they put in at the beginning towards the deposit.
They have paid a monthly “Top Up” of £69 per month over the 5 years which equates to £4,140 towards the deposit.
They have the “Top Up” pound for pound match money, which equates to £4,140.
In total £11,275 towards a deposit of £10,700 meaning we give you back £575 in your hand, plus if the property is worth more than the £107,000 purchase price, you keep that too…
So for £2,995 upfront and less than current market rent per month, Janet & John own their own home.
Still want to pay dead rent money?
Benefits of a tenant Buyer
See the Benefits in becoming a Tenant Buyer.
• No mortgage required to get started.
• You are in a position of Ownership on Day one.
• Very low entry money to “Get Started” and become a Homeowner.
• You own 100% of the property.
• If the property value increases, you keep the difference.
• It's Legal.
• Buy over a time period that suits you.
• You can walk away at any time if things change for you.
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