The Value Of Rent-to-buy
For young families, couples or individuals seeking to purchase their first house
, there is an outstanding opportunity to profit from Rent-to-Buy properties. These homes are offered for rent by their vendors, with a price set at todays market value for the possible purchase of the property in a fixed number of years. There are some outstanding benefits associated with this type of property purchase.First, there is the opportunity to save for your deposit over the rental period. You do not need to pay a large percentage of the purchase price when you move into the property, just the regular rent that you would be paying if you were only a tenant. This gives you the chance to plan ahead and save accordingly for the sum you will need if you choose to proceed with the property purchase. Furthermore, the amounts that you pay in rent are deducted from the purchase price of the property, so in some cases you will not have to pay a deposit at all!
The second benefit is that, whilst living in the house, you can decide if it is the ideal home for you and your family (or your family to be). Rental periods in Rent-to-Buy schemes can frequently be as long as five years, giving the occupier a valuable opportunity to assess the location in respect of nearby schools, health care, public transport and recreational facilities. You also get to experience the pros and cons of the property and the area in which it is situated.
However, the major financial benefit of a Rent-to-Buy scheme is the potential of capital appreciation. The future price you pay for the property is established before you move in, and even though you have no obligation to buy the property at the end of the rental period, the vendor is legally committed to selling it to you if you decide to take up the option. Although the UK housing market may currently be described as depressed, who knows what the future will bring? After the last house price crash of the early nineties, the average price of a UK home rose by almost 10% per year for the next five years, and property buyers in 1995 had seen the value of their homes increased by a compound total of 50.9% by the end of year 2000. If the same scenario were to be repeated today, a home priced at 160.000 would be worth 241.440 by the time you had to consider applying for a mortgage. It is possible that you may have already paid 40.000 in rent over the previous five years, and what bank is not going to lend you 120.000 on a property worth double that? In theory, you could even complete on the property purchase, re-sell the property, and be an incredible amount in profit.
As you can see, the value of Rent-to-Buy now offers a major financial opportunity for people looking to purchase their first home.
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