Imagine paying rent as a monthly payment toward purchasing your forever home.
Having to renovate, paint, take down those odd walls, add more lighting, or even install a gazebo for stand-alone homes.
All this is possible when you own a home and aren’t concerned about the landlord refusing to refund your deposit because you changed the wall colour or added some shelves in the bathroom.
But what is rent to own?
How does it work? Are there any disadvantages related to it? What should you consider before signing a rent-to-own agreement?
If that sounds appealing, here’s everything you need to know about renting to own and why it might be a viable option for you.
What is Rent to Own?
Modern Bungalow for sale at Kahawa Sukari
Rent-to-own, lease option, or lease-to-own is a realistic option if you can’t afford a down payment or don’t have enough credit to qualify for a mortgage/loan.
It is a legally binding agreement between a real estate property owner (seller) and a renter (buyer) under which the buyer continues renting the real estate investment property for a specified amount of time (typically 1-3 years) before acquiring it and claiming ownership.
Rent-to-own is an option if:
- Your landlord shows interest in selling off their property.
- Companies like us, Continuum Favour Properties, advertise rent-to-own homes.
- You approach the landlord and propose renting to own your apartment or home.
Expert Tip: It’s also a good approach to determine whether you’ll love living in a particular area by choosing a rent-to-own agreement, which offers you the option of not purchasing the home at the end of the lease time.
How Rent-to-Own works in Kenya
5 bedrooms all ensuite to let at Kitisuru
Rent to own necessitates that you must be able to afford both the rent and the down payment for the home after a specific number of years (usually 1-3).
- You can choose between two different types of rent-to-own agreements.:
- Lease purchase
You’re legally compelled to buy your house when your rent-to-own contract expires, regardless of whether you can afford it.
- Lease option
You’ll be able to buy the house at the end of the lease with this agreement. You can choose not to buy it if you are no longer interested in it.
- The landlord includes an option fee in the rent-to-own agreement, ranging from 1% to 5% of the home’s purchase price. When your lease expires, the option fee provides you with the chance to buy the residence. It’s negotiable and non-refundable, but applied to the home purchase.
- The average repayment period is one to three years. You may complete the payment early if you believe it will take you less time to get your finances to qualify for a mortgage or loan, or if you have enough money saved up to pay the remaining amount in cash.
- It’s critical that you clearly define your expectations for repairs and upkeep before signing a rent-to-own deal.
When you agree to a rent-to-own agreement as a buyer, the seller (landlord) will keep a percentage of the rent as equity for buying the house.
Expert Tip: Before purchasing and owning a property, inspect it to see what has to be altered, and the required modifications.
Rent to Own Advantages
| Buyers | Sellers |
| The rent-to-own plan allows buyers to save up enough money to put toward a down payment on a home by deducting a portion of their monthly rent payment from the purchase price | When the tenant moves in, the option price is non-refundable; therefore, there is a guarantee of profit |
| As long as you have signed the rent-to-own agreement, there will be no increase in the options fee | For the duration of the lease, you receive rental income and an assurance that your investment property will not become unoccupied |
| While paying monthly rent, you have total control over your home | Renters contribute to the upkeep of the investment property; thus repairs are less expensive. Additionally, renters are less likely to damage the property. |
Rent to Own Disadvantages
Bedsitter units to sale at Kirigiti Kiambu Town
- Buyer: If you are late on your rent, some agreements will reduce or cancel your rent credit for that month; if you do not purchase your rent to own, you will lose all of your money invested in that time.
- Seller: When a buyer decides not to purchase an investment property, you must begin searching for a new buyer.
Use an Agent to Get Rent to Own Services
If you cannot obtain a loan or mortgage, you may purchase your permanent residence through a rent-to-own arrangement. An agent can help you with this by:
- Assisting you in contacting the buyer or seller.
- Help the buyer set the rent-to-own property’s option fee and monthly rent.
- Ensure everything is in order for a buyer before you sign the contract.
- Help identify what kind of rent-to-own agreement is ideal for the buyer.
At Continuum Favour Properties, we offer lease and property management services for residential and commercial properties in Nairobi.
To learn more about rent-to-own homes, a service we are introducing soon, check out our catalogue of all the properties available for rent to own, rent, or purchase. Alternatively, you can contact us by phone or WhatsApp at +254 707 557 711.