What you need to know and how to go about it.



Rent and Own

Beat the rent-trap!

A 'Rent And Own' program (successfully executed) lets you "capture" any capital appreciation the property experiences, whilst you rent it!

If you stick to the program and make it work, it could be one the best decisions you ever make for you and your family.

Let's quickly unpack how Rent And Own works.

Weekly payments under a 'Rent And Own' program are definitely higher than a normal rental agreement

However that makes sense when you consider that the owner has agreed to give you all of the capital growth above a certain amount. After all, there needs to be something in it for the Seller or it wouldn't make sense to entertain the idea.

The ultimate "TBYB" program (Try Before You Buy)

One of the real benefits of this program is that if the house prices don't increase, (see property cycles), you’re not committed to having to purchase the property. But, if the house prices increase through the roof, the seller MUST sell to you at the pre-agreed contract price.

As long as you can secure finance and facilitate the sale, you get to keep any and all equity increase the property enjoys above the agreed purchase/sale price.

Talk to us to make sure the contract is what you want and need to protect your investment

What is a rent-to-buy scheme?

A rent-to-buy, or rent-to-own, scheme is essentially a payment plan designed so you can move into a property you intend to buy and pay it off as if it was a rental.

While the schemes vary, many will allow you to enter a standard tenancy with the 'option to purchase' later on.

How the vendor makes any money, is usually through charging a higher rental rate than the market, which will often go toward the final big sum if you decide to go ahead with the purchase.

Let InvestorGroup do the hard work for you and navigate to process with you.

The Pros and Cons of rent-to-buy schemes

The Pros

With the right contractual agreement, the very real indisputable benefits of 'Rent And Own' are:-

~ The vendor has agreed to give you all of the capital growth above a certain pre-agreed contract sale price.

The ultimate "TBYB" program (Try Before You Buy)

~ If the house prices don't increase, (see property cycles), you’re not obligated to purchase the property.

~ If the house prices increase through the roof, the seller MUST sell to you at the pre-agreed contract price.

The Pros and Cons of rent-to-buy schemes

The Cons

The possible concern with these schemes as a prospective buyer are:

~ You could put money into a property by paying a higher weekly rental rate, only to potentially be booted from it after a default payment or two.

~ You may have been paying a higher weekly rental rate, only to have a change of heart and not want to buy.

~ Depending on the contract you sign, rental prices and the final sum can fluctuate depending on supply and demand in the market. The price you sign up for initially might not be the final figure you look at.

Are rent-to-buy schemes legal in my state?


Are rent-to-buy schemes worth it?

Every scheme is different with different contract conditions and catches.Ultimately, that decision is up to you

It’s strongly suggested you look into the contractual fine print, ask a legal expert and weigh up some important questions such as, what happens if I default on a payment? And do I get any money back if I decide not to proceed?


Rent to Buy, Rent to Own - Cautionary Words

While some schemes could work out well for those wanting to buy into the property market, historically there have been a number of issues leading to more legislation and regulation around them. The South Australian government strongly recommends its citizens away from buying into these schemes due to the fact they’re often such high risk.

“Any contract that requires the payment of part of the purchase price for a property, other than a deposit, isn’t legally binding in South Australia,” the government warning reads. “This means that if you have signed a rent to buy contract you may be able to take the matter to court to try and recover some or all of the payments you have already made.”

Similarly, the WA government warns the schemes are high-risk and could leave renters with no claim to the property if they default on a single payment.

The reality is, while governments and some property experts warn about the riskiness of such a transaction, the legislation surrounding it is quite vague from state-to-state. In 2016, a Melbourne man challenged a rent-to-buy scheme in court after he struggled to make payments and had no property title to fall back on, according to an ABC article.

A 2016 report by the Consumer Action Law Centre detailed the vague legislation related to these schemes highlighting concerns people, like the Melbourne man, could be left in dire situations.

“Gaps in the law can leave people with limited or no legal protections if things go wrong. The effectiveness of legal protections varies depending on the people involved and the nature of the transaction,” the report outlined.

“This legal uncertainty, coupled with a lack of independent legal advice, is why the risks of these schemes are so significant, particularly for buyers.”

So, while the schemes might sound appealing for those desperate to get into the housing market, it’s very much a tale of proceed with caution (and plenty of legal advice).

In some cases, it might just be safer and cheaper to do it the old-fashioned way — a dreaded mortgage.