In a normal real estate transaction, the seller accepts the buyer’s offer and when payment is made, the transaction is closed. However, some people do not have the financial ability to raise the money required for the property. A mortgage is the most popular method most people use to finance for the purchase. What a lot of people don’t know is that there is an alternative option known as rent-to-own. This can even be a valid option for international real estate purchase.
The international rent-to-own process is more complicated than the conventional process of buying a property. So, it is advisable to hire an experienced realtor from such as Dubai real estate agencies. Right now, you can get various types of properties to invest in Dubai such as City walk apartments or Bluewaters apartments. Alternatively, there are numerous new projects by Emaar Properties, which is one of the biggest developers in the region.
What is Rent-to-Own?
This is an option that offers the potential buyer the opportunity to purchase a property later after renting for a certain amount of time. The contract has two main parts: a standard lease agreement and option to buy.
After signing the contract, the seller is prohibited from placing the property back to the market during the period stated in the contract.
How it Works
1. Non refundable upfront fees
The buyer is required to pay a one-time, usually nonrefundable fee known as the option fee, option money or option consideration. This is what gives them the option to buy the property later.
2. Lease-option and lease-purchase
There are different types of rent-to-own contracts. A lease-option contract gives the buyer the right, but not the obligation, to buy the home when the lease expires. However, in a lease-purchase contract, the buyer is obligated to buy the property at the end of the lease.
3. Agreeing on the purchase price
The rent-to-own contract should indicate how and when the purchase price is determined. In some instances, the buyer and the seller agree on the purchase price while signing the contract.
4. Applying rent to the principal
There is no doubt that the buyer will pay rent during the leasing term. The question is whether the landlord can direct a portion of the rent to the eventual purchase price. Typically, the rent is higher than the ongoing rate.
Depending on the terms of the contract, the buyer can be responsible for maintaining the property and paying for repairs during the lease term. In most cases, this is the landlord’s responsibility, so read the contract carefully.
6. Buying the property
The outcome of the contract depends on the type of agreement signed. If it is a lease-option, the tenant can move out after the term of the lease expires. However, in a lease-purchase, the tenant is legally obligated to buy the property.