Rent-to-own Scheme: A Go or a No?

"If you want to achieve more in  life, you should be assertive and be persistent for  everything you need or want."

 Let me share with you a story of my sister in law in California;

 "I really wanted to have a house but i do not have a bank credit yet back then.  So i tried to  negotiate  with the owners of the houses I like  if they could let me have it through rent to own scheme, I was turned down several times  but i persisted  until i  met this  old couple who agreed on a rent-to-own basis. After 5 years, I was able to build up a bank credit  and was able to build enough equity not only to fully  bank  finance the balance,   i even had extra to remodel the house."

My sister-in-law never fall short in sharing with me her story. Sounds good right?

Here in the Philippines, we can also do arrangements like that. However, most of us are unaware  rent-to-own scheme when it comes to acquiring a home.

Want to know how it works? Read it for yourself and spread the word.

According to my own understanding, a rent-to-own concept is an arrangement between the Lessee and the Lessor where in the Lessee will have an option to buy the property after a certain period of time, and you can actually negotiate this arrangement with an owner who has property for lease or sale. Well... there is no harm in trying.

Let me give you an example.

There’s a condominium for Lease in Makati and it’s open to a rent-to-own arrangement. Instead of a regular rental contract, they have this so-called “Contract of Lease with Option to buy” document. There will be a non-refundable fee which is termed as “option consideration”. If the price of that condominium in Makati is 3 Million, then the “option fee” for that condominium in Makati will be around P150, 000 to P300, 000. You can also settle this payment through deducting it in your down payment if you decide to buy the property in the long run.

There are also terms and conditions that will be agreed upon by and between the Lessee and the Lessor. Other terms might still be negotiable depending on the buyer and the seller.

Let us take a look on the advantages of staying in a rent-to-own scheme.

1. Instant equity

Experience the feeling of having an instant  home without immediately drawing out a million peso from your account. You can also have the ability to lock in a purchase price, in case home prices increase the next few years.

2. No immediate bank involvement

Admit it, it really takes time to save and shell out cash for a one-time bigtime payment. In this deal, you will be given enough time to build your credits depending on the agreed monthly payment. It will not be costly compared to a single full payment for a certain property. You will actually save a percentage from your rental payment and part of it will be credited to your down payment.

3. Hassle-free process

If in case you’ll be interested to agree on a rent-to-own scheme, it will be easier for you to dress it up as the house is  ready to be occupied. You will get used to a place with your new friends and neighbors without making a huge purchase. Aside from having time to build up a down payment and good credit record, renters have the advantage of "trying out" the house.

However, there are also pitfalls in rent-to-own scheme. At the end of the day, if you don’t buy the home, you will lose your "option to buy consderation payment". There are also rent-to-own scams so make sure the agreement is reviewed very well.  It is also not aguarantee that prices will go up, although here in the Philippines properties have steadily gone up.  Last but not the least, there might be problems on the property that you don’t know  so better do a due diligence even before entering into a rent-to-own scheme.

Anyhow, we can always try to consult professionals for further review and assistance.

Photo Credit: Why Rent
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A Reputable and Professional Licensed Real Estate Broker: Why You Need One

I’ve been reading some news and featured articles on various magazines and online platforms about acquiring a real estate property since 2005. All of a sudden, I just realized how impractical  it would be for a strart-up  families or  real estate investors and  to buy a property without the help of a reputable licensed real estate broker.

As a bump-start, here’s my story..

Years ago, I was so excited to acquire a lot sale  in Quezon City. I remember how uncertain we were before to pay the full amount of the property even if  we will get an additional 10 percent off from the total purchase price. We were in doubt if the developer  could really complete the project. The subdivision project was on the pre-selling stage. 

It was indeed an endearing act from the firm to give us a total of  20 percent discount from the total purchase price for that lot for sale in Quezon City . 10% for being the one of the first 5 buyers to reserve plus another  10%  discount if we will pay in full within 7 days. But we  knew we had to do our homework first and verify risks involved before we pay for that lot for sale in Quezon city. So we thought of asking help from a reputable broker in doing a due diligence on the subdivision project. Believe me, you would really be needing the help of a professional broker (only if you want to find great value for your money and lower the risk of being cheated and tricked).

Taking into account the various angles of the situation, we discovered that the realty firm that issued us a receipt for our reservation fee was not yet licensed to sell the subdivision project . Thus, the developer has a partner bank  so there will be no problem in as far completion of subdivision is concerned. Our broker suggested that we place the full payment in an "escrow account" , until they get their license to sell. With that we've essetnially paid so , gave us the 20 percent discount as agreed. For added security we had the contract to sell annotated in the “Title” of the subject lot of subdivision project.

We paid the broker 2 percent of the total price and it was a win-win situation for both ends. I’ve been considering the services of a reputable and licensed real estate broker since I was an amateur in the Real Estate Industry and it was a huge help actually.

Everything happens for reasons. My experiences from the past might be the cultivating point of who I am today; a Licensed Real Estate Broker who just wanted to share her learning and ideas for those who are just starting out as newbie owners of a real property.

Here are the reasons why you need one:

  1. You will have their loyalty

A reputable licensed professional broker will only charge you a fair and reasonable commission that is in accordance with local practice. Their loyalty is also with you. They’ll unlikely connive with other agents’ ideas like setting a five hundred thousand pesos overhead to a three million pre-owned Townhouse in Quezon City that you are planning to buy just to get a higher commission.

  2.  To do due diligence on the property

Whether you’re planning to buy a 12sqm condominium near MRT or a start-up house and lot in Bulacan, it will be a test of getting the most out of your money. You should always be careful because you won’t want to see your money flying out because the title to the property sold to you is fake. You will also not want to become a victim of double sale (title has encumbrances that will make you unable to own the property. It is a standard responsibility for a reputable licensed real estate broker to conduct due diligence on the real estate property that you would want to buy to avoid any constraints.

 3. Assist you with the sales process and documentation

Even big developers can sometimes get creative with sales documentations, and/or include clauses that are not fair to the buyer or at certain extent against the law. A reputable licensed real estate broker should be able to evaluate the documents you are about to sign for that condominium, townhouse or house and lot. Stated in the documents should be fair to you and always in accordance with existing laws.      

Let us all be conversant and knowledgeable in investing our money and time for our future properties as we are all liable for every action and decision we make.

Let us also be wise in putting our trust to every person especially to the brokers and realty firms’ personnel as well. It is difficult to recuperate the lost. Better be wise and curious than having no idea at all.                                                                                                                                                      



 Photo Credit: Cesar E. Santos
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