Many individuals are still hesitant to purchase their first home, and instead opt to rent or live with relatives to save for the future. This predicament in the real estate housing market has made condos a popular choice among individuals who don’t want to continue renting but aren’t keen on buying an entire house.
Although there are many condo units for sale in prime locations such as the center of the Ortigas business district, not everyone can purchase a unit outright, or even afford a down payment. Because of these issues, ‘rent-to-own’ agreements are becoming a popular choice for savvy investors tired of continuously paying for monthly rent, ultimately making an excellent investment for their future.
As with other major financial decisions, rent-to-own agreements have their advantages and disadvantages. Here’s everything you need to know about rent-to-own condos, from how it works to its benefits, helping you make a better and more informed decision.
How Rent-to-Own Condos Work
While no rent-to-own agreements are the same, with each state featuring various requirements and regulations, the basic rent-to-own policy agreement gives the renter or buyer the option to purchase the property after a set period, usually around 3 to 4 years. The renter’s monthly payments include the typical rent payment and additional fees for the down payment for buying the unit.
The Lease and Pricing
On the seller’s part, the least contract they provide should state the renter’s monthly rental payment, how much of the fees accrue toward the down payment, and the total buying price of the condo. During the lease, when the buyer agrees to pay the full amount of the condo rent and the percentage applied towards the total purchase prices, this is called the rent credit.
The credit is around 25% of the tenant’s monthly rent. For instance, if the rent is $2000 per month, then $500 would be credited to the down payment for the unit’s total purchase price, bringing the total amount up to $18,000 for a standard 3-year lease agreement.
Although all rent-to-own agreements are different, buyers are often responsible for the maintenance fee while renting to own a condo unit, including property taxes and insurance. These additional costs can do substantial damage on your wallet, so before agreeing on any rent-to-own policies, ensure that any maintenance policies are covered.
Now that you know the ins and outs of renting a condo, it pays to know the advantages and disadvantages of the agreement.
Even if you have bad credit, you can still rent to own a condo, giving you a unit immediately and time to rebuild your credit. It allows you to test the condo unit out, giving you the option of not purchasing it if you didn’t like it. Finally, if you choose to buy the condo, which usually has a fixed price, you may benefit from it if the market price increases by the time you want to sell the unit.
If you agreed on a rent-to-own agreement but decided not to purchase the condo unit, all paid rents in the past, including the accrued credits for the down payment, will be forfeited.
Rent-to-own condos are the perfect choice for individuals who aren’t ready to make down payment on mortgages, purchase an entire house, or are tired of renting. Save for your future and invest in a rent-to-own condo today.