Defining RENT TO OWN

[TED4]

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What is RENT TO OWN?

The term "RENT TO OWN" has often been similarly used by realtors to indicate affordable monthly payments on a house and lot. A property seeker's idea of rent to own is to rent the property and live in it, while paying with the intent of eventually owning it. However, these properties are often not fully constructed thus, defeating the purpose of the property seeker's rent to own.

A good definition of RENT TO OWN is an agreement between a buyer and a property owner wherein the buyer rents the property at a certain amount for a certain period of time in which the property owner will apply the partial or the entire rental payments towards a downpayment for a purchase of the property. For a property seeker, this agreement is very enticing, however, not as attractive for property owners and developers. See below example.

Example:

Property Price: Php 1M
Downpayment: Php 300k
Balance: Php 700k

Rent to own scheme with downpayment:

Monthly Downpayment (24 mos): Php 12,500
Monthly Rental: Php 6,000
Monthly Payment for 24 mos: Php 18,500

After 24 months:
Downpayment completed: Php 300k
Balance can then be applied for a loan in a financial institution/PAGIBIG
Total Amount Paid: Php 300k dp + Php 144k of rental: Php 444,000

Rent to own scheme for entire property price:

Monthly payment (10 yrs @ 0% int): Php 8,3343
Monthly Rental: Php 6,000
Monthly Payment for 10 yrs: Php 14,333
Total Amount Paid: Php 1M + Php 720k of rental: Php 1,720,000

This scheme is not very attractive for property owners and developers primarily due to the length of time to get a return of investment. The business of real estate has a lot to do with cash flow.

The RENT TO OWN scheme is more or less identical to renting an apartment while taking advantage of the pre-selling and easy payment schemes offered by reputable developers.

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[TED4]

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[TED4]

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[TED4]

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[TED4]

TED4 Properties and DevelopmentCorporation
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[TED4]

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[21guns]

This scheme is not very attractive for property owners and developers primarily due to the length of time to get a return of investment. The business of real estate has a lot to do with cash flow.

Not attractive as describe and yet murag ohong nag sulputan ang mga rent to own karon up tp 30yrs pa. It was an opposite to the statement above. Can you explain why this is happening?

[TED4]

Hi, thanks for your comment. 30 years to pay but move in to the property in 36 mos is more like an easy payment scheme rather than rent to own. unless mka move in nka sa place on the first month of payment, so if like 10k per month, then 30 years to pay, if rent to own, on the first month pa lng, move in nka.

[21guns]

Hi, thanks for your comment. 30 years to pay but move in to the property in 36 mos is more like an easy payment scheme rather than rent to own. unless mka move in nka sa place on the first month of payment, so if like 10k per month, then 30 years to pay, if rent to own, on the first month pa lng, move in nka.

I will simply the question sir " Why is scheme is not very attractive for property owners and developers primarily due to the length of time to get RIO in you first statement in 10 years time?

Your answer above in 30yrs time describes an advantage to buyers and does not explain if it is attractive to property owner and developers.

I believe both have risk buyer and seller. Buyer has to pay less amount each month but also will have bigger total amount with the 30 years period. Plus the risk of title transfer after that time. Risk because banks are approving loans with lots still in a mother title and not in sub divided lot title. If the lot owner of the mother title dies and claims have not been settled. Titling for subdividing the lots will have problem in that 30yrs risk time.

For the seller the only risk is getting the RIO in which total lot price will also double or triple with respect to the years to pay.
If buyer stops paying no problem to the seller because he/she still own the property.

[TED4]

hi, very good points, let me go through it per paragraph.

I will simply the question sir " Why is scheme is not very attractive for property owners and developers primarily due to the length of time to get RIO in you first statement in 10 years time?

I think there is a typo here somewhere but getting roi in 10 yrs time is not very good.

Your answer above in 30yrs time describes an advantage to buyers and does not explain if it is attractive to property owner and developers.

This will definitely work for property owners as pagibig or the financial institution granting the loan will pay the owner, and of course the buyer will pay pagibig or the financial institution on their agreed terms.

I believe both have risk buyer and seller. Buyer has to pay less amount each month but also will have bigger total amount with the 30 years period. Plus the risk of title transfer after that time. Risk because banks are approving loans with lots still in a mother title and not in sub divided lot title. If the lot owner of the mother title dies and claims have not been settled. Titling for subdividing the lots will have problem in that 30yrs risk time.

If the bank approves the loan, less risk on the seller, as he already gets his money and of course buyer pays equity. I agree on the risk of the buyer when loans are approved even without individual titles, but that's a risk the buyer will have to take to enjoy the easy payment schemes offered. Since, by the time individual titles will be ready, a house would already be on top of the lot, which would mean challenging payment options for the buyers, perhaps a 6 month 20% - 30% downpayment term.

For the seller the only risk is getting the RIO in which total lot price will also double or triple with respect to the years to pay.
If buyer stops paying no problem to the seller because he/she still own the property.

The total lot price will increase but if the buyer stops paying, the bank will foreclose the property, not the seller.

Thanks!