Rent to Buy Schemes

There has been a sudden increase in property owners offering “Rent to Buy” schemes all over Ireland.

Is this just a marketing ploy to rent houses that property owners can’t sell or is it a viable option for first time buyers?

We’re seeing more of these rent to buy offers because there’s a growing backlog of unsold homes and prices are stagnant or falling in most parts of the country. That has left some owners – particularly investors and developers – with a problem. So now they’re trying to rent them.

Sellers can probably benefit from rent-to-buy agreements more than buyers. Not only can the seller lock in a price before property values plunge further, but they also collect market-rate rent until the closing.
It is not unheard of for developers and agents to use a purchase option to justify higher rents and lock you into a purchase price that’s higher than those of  comparable houses.

The many schemes that go under the banner of rent-to-buy vary dramatically, and the small print can change from one company or developer to another.
Offering to credit part of each month’s rent toward the purchase price of the home is the key element of any “Rent to Buy” deal.
They also often require you to pay a deposit. It is non refundable, but it is usually also credited toward your deposit.

The date at which the agreement expires varies by contract but is typically between two and five years. At that point, the renter can choose to buy the home at the original listed price minus the equity he or she has built. If not, then the homeowner has the option to evict them and keep all payments.

Making a rent-to-buy agreement in an area where house values are still dropping can be risky. That’s because you’re negotiating the purchase price for a property now that you may not actually buy for more than a year. That could easily result in overbidding. The monthly rent should also be on par for the market. With rents declining, in many places, you could end up paying more than the market rent over the next few years.
If property values were increasing – Rent to Buy would look to be a good option – but would many owners be offering such schemes if property prices were going up? I doubt it.

Always obtain independent legal advice before entering into a Rent to Buy contract. Do not accept legal advice from the vendor the agent or the vendor’s solicitor.