Rent-to-Own Contract - How does it work?
Rent to own is a real estate option in which the tenant pays a monthly rent with the option to buy the property at a future date at a previously agreed price.
In the North Zone of Madrid: La Moraleja, El Soto, El Encinar de los Reyes and Ciudalcampo it is possible to find properties available for rent to own, but it is important to keep in mind that each property and situation is unique and there can be significant differences in terms and conditions.
Before signing a rent to own contract, it is important to fully understand the terms and conditions, including the agreed purchase price, the length of the rental contract, and whether or not there is an "Option Premium".
It is advisable to consult with Rea Inmobiliaria's advisors or a lawyer before signing any such contract to make sure you fully understand the terms and conditions and to ensure that they meet your needs.
The terms and conditions of the Lease with Option to Purchase contract vary according to the interests of the parties, but for an Option to Purchase Contract to exist, there must necessarily be a price that is agreed today to be exercised in the future and a maximum term for exercising the option.
The remaining elements may or may not exist, and are as follows:
Option premium: This amount is an initial payment made by the lessee at the signing of the contract and which, depending on the amount (0 to 10%), assures the seller that the tenant will end up exercising the option. The amount of the option premium is deducted from the price to be paid when the option is exercised and if the option is not exercised, the tenant will lose this amount.
Tenant's responsibility: It will be stipulated who bears the expenses for maintenance and repairs.
Attribution of rent to the option price: Rent may be attributed in whole or in part (as negotiated) to the option price upon exercise of the option.
Among the advantages of rent-to-own are:
Homeowners:
This type of lease will allow landlords to earn a steady cash flow through rent and allows them to sell homes on a long-term basis while collecting rent.
Increasing the chances that the tenant will purchase the property at a future date.
Tenants:
This type of contract allows tenants who do not qualify to buy a property in the traditional way because they cannot afford a mortgage or money saved for the purchase, to have access to a property to live in.
They can live in the property before making the decision to buy it.
They can save while renting and thus have sufficient liquidity at the time of purchase.