The National Credit Act has made it difficult for potential home owners to get the loans they need to finance the purchase of a new property. This inability to get a loan makes it more difficult for these people to enter the housing market. Both first time buyers and the self-employed are particularly affected by the Act. Reports show that close to 50 percent of employed bond applicants are declined each month. An even more startling statistic is the 58 percent of self-employed applicants who are denied home loans.
A new concept is revolutionizing the South African property market. The introduction of a new Rent2Buy program in the area will provide buyers and sellers with an alternative way to conduct transactions. Meyer de Wall is the founder of Rent2Buy as well as a practicing attorney. According to De Wall, “We negotiate agreements between potential buyers and sellers whereby the buyer concludes a rental agreement with a seller with an option to purchase the property by a certain date and at an agreed price.”
Rent2Buy works by assuring the seller a set price for the property in the future. The buyer of the property pays rent in an amount that is approximately equal to the buyer’s future bond repayment. A unique aspect of the rent to buy transaction is that buyers are able to take immediate ownership of the property. Because they are taking over responsibility for the property, they are able to treat the home like it is their own and make changes accordingly. They will also be responsible for any rates, taxes, levies and maintenance.
“The idea is that the buyer uses the option period of the contract to prove his affordability and creditworthiness to the bank,” De Wall explains. “This way the buyer can eventually secure a loan to purchase the property. In addition to using the time to save for a deposit, he also shows he can afford the property and be disciplined by paying rent regularly and on time.”
Rent2Buy launched a home owner education programme with the goal of training and mentoring bond applicants and helping them succeed at securing a home loan. The My Budget Fitness programme will improve an applicant’s credit rating and put him on the path to being financially fit for a loan.
The programme was developed in association with Solly Molefe of Setsmol Training. “The programme is unique as it assigns personal budget trainers to applicants and uses innovative software to help home loan applicants track their progress and reach a financially fit state,” Molefe says. “Through mentorship, education and month-by-month guidance, home loan applicants reach affordability and clear their credit record as required under the National Credit Act.”
The My Budget Fitness Programme is available to anyone looking to secure a home loan, not just Rent2Buy customers. The hope is that allowing everyone access to this type of program will improve the ability of anyone seeking a home loan to achieve their goal of being financially fit to be approved for a bond.
Due to the amount of unsold properties in Spain coupled with falling home prices, Connells Group is to market thousands of heavily discounted Spanish properties.
Connells is partnering with Mediterranean CAM, the property branch of the Spanish savings bank CAM.
The rent to buy program will give buyers the option to rent a property for up to seven years. If the renter decides to purchase the property in the first two years, all the rent paid may be deducted from the purchase price.
In addition to the rent to buy option, buyers will have access to 90% mortgages through CAM.
According to Stuart Flavell, Connells chief executive: “We are delighted to have been chosen by Mediterranean CAM to market properties abroad. CAM Bank is the fourth-biggest savings bank in Spain and is an important financial institution with an impressive track record.
“Now is a great time to purchase a Spanish property and we believe there is an increasing number of people looking to buy in this market.
“Our customers can now purchase a property abroad, safe in the knowledge that they have the backing of a recognised and respected UK estate agent, together with guidance and advice from a well-established and successful Spanish Bank.”
To read more, click here.
In Hong Kong, a two-tiered solution to the skyrocketing home prices experienced over the few years has been proposed. The country will stop offering residency to foreigners who buy property. The second part of the proposed changes to Hong Kong’s policy is the implementation of a rent-to-buy program.
The new rent-to-buy program will offer 5,000 units for first-time property buyers. Buyers will able to rent for up to five years before eventually purchasing.
Cusson Leung, a Hong Kong-based analyst at Credit Suisse Group AG, commented that “many of the policies announced today may have only limited impact on the property market in the near term.”
“Take the rent-to-buy scheme,” said Leung, “a lot can still happen over the next few years.”
The rent-to-buy program will let first-time property owners rent a house for up to five years at a fixed rental cost. Half of the total rent paid during the rental period will be put towards a down payment to buy the home.
According to Wong Leung-sing, a research director at Centaline, Hong Kong’s biggest privately-held property broker, “These are good measures..I think this whole policy address is a move in the right direction.”
The first stage of the project is scheduled to be completed by 2014, and will include 1,000 units in the Tsing Yi district. Officials hope the new rent-to-buy initiative, coupled with a cease in residency offers to foreigners buying property will cool home prices and allow the housing market to settle. Only time will tell.
To read the original article on Bloomberg, click here.
PBS NewsHour presented a story on September 28th entitled, ‘To Rent or Buy? Housing Market Leaves No Easy Answers.’ Jeffrey Brown interviewed both Jack Hough of SmartMoney magazine and Karl Case, who helped develop the Case-Shiller Home Price Index.
To listen to the story or view the full transcript, click here.
According to Karl Case, there is mixed evidence on whether home prices have hit bottom. Home prices peaked in 2005 and have now stopped falling. Case believes we’ve reached a bottom, but that it’s hard to know whether prices will continue to fall or stay up. Despite the uncertainty, Case remains optimistic. He discusses property as a consumer durable good; he states that benefit accrues to people just from owning it, basically tax-free, at about 6%.
Jack Hough, when asked how fragile things are, makes it clear that the worst of the price plunge is over. Though certain about the end of plunging house prices, he believes we could be in for a long period (potentially a 10 year period) of disappointing returns. According to Hough, prices are lagging behind the rate of inflation. People need to remember what the normal return for a single family home looks like, and think about inflation when making decisions about homeownership.
When it comes to the question of whether it’s better to buy or rent, Case and Hough differ in their opinions.
Case points out the positive aspects of buying. He cites, again, the fact that a house is a durable good. He encourages potential homeowners to think about the yield from their purchase (you live in it, rent-free, and non-taxable). He also reminds listeners that if your house falls in value, this is not necessarily a problem if you are planning to live in your home for a long time.
Hough makes a case for renting. He says that there is nothing wrong with buying a nice house, but that there is too much talk of single family housing as an investment coming from the government. He believes houses today are seen as form of consumption, but that homes were not designed for consumption. Hough advises potential homeowners to consider whether or not they can afford it; if they can’t afford it and don’t anticipate what actually goes into it, they should rent.
The option to rent to buy a home is not mentioned by either contributor to the PBS segment. However, it is clear that there is no consensus as to whether renting or buying is the best option, taking into consideration the state of the current economy. Rent to buy is an option that potential homeowners should seriously consider when deciding whether renting or buying is the best fit for them in their current financial circumstances.
Explore Rent2Buy.com for comprehensive real estate listings and the option to rent to buy your next home.
The rent-to-buy model is intended to afford more people the opportunity to own their own home. Research by CB Richard Ellis indicates that the rent-to-buy initiative does not just benefit potential homeowners. Their research indicates that rent-to-buy real estate has the potential to unlock the housing market.
Rent-to-buy uses the private rental sector as an intermediate stage in the process of purchasing a home. This intermediate step allows both homebuyers and seller to sidestep financial constraints. This is particularly helpful for first-time buyers, and also serves as a way to allow developers to exit a residential project.
In the real estate sector, the rent-to-buy process lets prospective home buyers move into a home as a private rental tenant. They then have the option to buy the property at a pre-agreed price at a future date. Rent on the property acts as a form of savings for the buyer, as it is used to offset against the deposit at the time of purchase. The rent paid to the seller during the rental period can be used to service debt until the sale is made.
According to Jennet Siebrits, head of residential research at CB Richard Ellis, “The transfer of new build homes to the private rented sector has become a more viable and obvious exit strategy for developers because of the subdued sales environment. Rent-to-buy is an innovative solution that uses private rental as a facilitator to unblock both ends of the development equation.
“The flexibility of the model is appealing as it can be adjusted to suit the individual circumstances of the developer or buyer. However, there is a trade-off between the length of the lease and the size of the deposit.
“A longer lease will enable the buyer to save a larger deposit, but the buyer must ensure the home has an extended appeal. Developers can reduce risk by considering an upfront, non-refundable deposit of one or two per cent in case the sale falls through.”
To read more, click here.
On the Rent2buy website, the majority of items will be rent to buy, rent to own, or lease to buy. There will also be some items that are listed for sale only. We want to give you an opportunity to ‘make an offer’ on these items so you can try them out before you buy them. Next to any item on the site that is not listed specifically as rent to buy, rent to own, or lease to buy, there will be a ‘make an offer’ button. If you click this button, you can then ‘make an offer’ that will be sent to the person or store selling the item.
The opportunity to make an offer will benefit both customer and seller. For the customer, the option to make an offer means you have the freedom to create a transaction that is tailored to your needs. The customer and seller can work together on an agreement that is mutually beneficial. In the end, the customer is better off because they have had the opportunity to rent to buy, rent to own, or lease to buy an item that was originally only listed as for sale. The seller is better off because they have found a profitable way to sell or rent their item. Make an offer is just another way to connect buyers and sellers and give both parties the freedom to structure a transaction that fits their needs. Read on to learn more about how ‘make an offer’ works.
When you ‘make an offer,’ you have 3 options. You can:
1) Make an offer to rent to buy
2) Make an offer to rent to own
3) Make an offer to lease to buy
Each one of these transaction types is explained in depth in previous blog posts. We will briefly explore the three ‘make an offer’ options below, and explain when each type of offer might be appropriate.
You may want to make a rent to buy offer if it is for an item that you want to try out for a short period of time before purchasing. You will be able to indicate the amount of time you want to try out the item for and how much you are willing to pay the seller in rent over that period of time.
You may want to make a rent to own offer if you want to spread out your payments over a longer period of time. An example of such a situation is the purchase of a house. You may want to ‘make an offer’ to rent to own a house if you need help financing it. Just like a rent to buy offer, you will need to indicate how much you intend to pay per month, how much interest you are willing to pay, and over what period of time you would like to make these payments. If the seller allows you to rent to own that property, you will make monthly payments over the stipulated period of time until eventually you are a homeowner.
You may want to make a lease to buy offer if you want to make smaller monthly payments. At the end of the lease contract, there will be one large balloon payment and then you will own the item you were leasing. This type of transaction is often applied to the auto industry. When signing a lease to buy contract, take note of the fine print. For example, in the case of a car: there may be extra fees if you return a car with damage or over an allotted mileage. Lease to buy is a good option as long as you are aware of what’s written in the contract and you educate yourself about what potential penalties may exist prior to entering into an agreement.
To sum up: Every item on the rent2buy website will be rent to buy. However, you are still given the option to ‘make an offer.’ This offer can be short term (rent to buy), financial term (rent to own), or balloon payment term (lease to buy).
Feel free to comment and share your feedback. We would love your input!
The auto section of rent2buy will be coming in early 2011. On the rent2buy site, you will be able to browse cars by type, make and model. You will also be able to search for rent to buy, rent to own, lease to buy or make an offer.
The rent2buy site is about all 4 search options : rent to buy, rent to own, lease to buy, and make an offer to a dealer. You can search specifically for each kind of transaction, or explore them all! This means there are four entirely different options available for how to structure your transaction.
The rent to buy transaction is short term, and all about giving you an opportunity to ‘try it before you buy it.’ The rent to own transaction is more long term and entails monthly payments over a longer period of time until you eventually own your vehicle. Lease to buy is similar to rent to own in that you make a monthly payment over a period of time; the difference is that with lease to buy, your payments are smaller, and there is a large balloon payment at the end of your transaction if you want to purchase the vehicle. If you decide not to purchase it, you can return the car at the end of the lease term and you do not need to make a final balloon payment. The last option is to make an offer to a dealer. This means setting your own parameters in terms of how long you would like to rent the vehicle and how much you are willing to pay to do so. The make an offer option allows you to make an offer to a dealer and then work out an agreement that is suitable to you both.
On the site, you will also be able to search used rental cars by make, model, zip code, and desired pick-up date. With all of the available search options, you are guaranteed to find a car that suits your needs.
The idea behind auto.rent2buy.com is to allow you, the consumer, to easily search for autos that fit your needs. What makes rent2buy unique in the auto industry is that you have various options for purchasing a vehicle. The rent to buy process is a valuable option that many are not aware exists and have not considered exploring.
Rent to buy allows you to try out a car before you buy it. Let’s say, for example, you have searched used rental cars by make and model and have located a car near you. You aren’t sure if this car is going to be big enough for you and your family to fit comfortably. Constantly shuttling your kids around town to various sports and other activities, you know how important it is to find a car that fits just right.
The rent2buy site allows you to rent a car for a short period of time and try it out before you buy it. After the rental period is over, you can choose whether or not to buy the car. If it was a great fit, go ahead and buy it! If you think there’s another option that might be better for you, go ahead and try out something different.
Because you can try it before you buy it, the vehicle that you purchase in the end is guaranteed to be exactly what you want. There is no commitment at all to buy the car. So hop in that red Camaro, take your wife for a spin, and convince her you really, really need it. Who knows, at the end of a few short days of chauffeuring her around town in it, you may just be the owner of that bright red sports car you always dreamed of.
Thoughts on the rent to buy process? Thoughts on the look of the new auto.rent2buy.com homepage? Let us know!