Rent to Own for Landlords

Rent to Own offers landlords an alternative method of selling their property. Landlords can benefit from an agreed future purchase and a fixed period of insured monthly income (commonly 5 years).

Benefits of Rent to Own

  • Sell your property for a pre-agreed price
  • Achieve compounded capital growth of 4% per annum
  • Secure monthly income for the duration of the option period
  • Minimise voids in your portfolio
  • Tenants have a vested financial interest in the property given their intended future ownership
  • Tenants are contractually responsible for all repairs
  • Experience shows that tenants take care more care of the property given that it is their future home
  • Benefit from an enhanced net profit – experience shows that landlords achieve 28% more profit renting their property via Rent to Own
Download Landlord Brochure
benefit-1

Frequently asked questions

Is my property suitable for rent to own?
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Rent to own is available to everyone but is best suited for properties in theprice range of £70,000 to £100,000. This price range provides landlords with the most attractive returns whilst meeting the affordability criteria of many Tenant Buyers. Experience has shown that higher value properties are not suitable as the option periods would simply be too long.

How long will it take to sell my property?
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Most option periods commonly last 5 years. From starting the Rent to Own process, you could sell your property in a minimum of 5 years for a pre-agreed future price with secure monthly income.

How is the future purchase price calculated?
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The future purchase price is based upon a RICS valuation of your property prior to entering into the option agreement. The RICS valuation is subsequently increased at a compounded rate of 4% per annum for the lifetime of the option (commonly 5 years).

What if the Tenant Buyer leaves or damages the property?
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Unless very limited criteria are met, the Tenant Buyer will lose the accumulated top up if they do not follow through with the option to purchase the property. In those circumstances, the top up will be used to, settle any arrears, repair the property and put right any damage caused by the Tenant Buyer. If there is a surplus, this is shared between the landlord and Rent to Own.

Am I renting out or selling the property?
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Ultimately, both. At the end of the option period, the Tenant Buyer has the option to purchase the property for a pre-agreed price, using the cumulated top up payments as their deposit.

What if my property is mortgaged?
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If a landlord’s property is mortgaged, it is essential that the lender’s consent is obtained before entering into the option agreement. Once the Tenant Buyer moves in, the landlord remains responsible for the mortgage payments until the property sale is completed.

What will it cost me?
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Landlords pay an option arrangement fee of £1,500 once the Tenant Buyer has been approved. This covers the cost of:

  • Marketing the Property
  • Sourcing the Tenant Buyer,
  • Surveyor’s fees
  • All administration and drafting of documents

Once the Tenant Buyer enters into the option agreement, the Tenant Buyer pays the monthly rent as normal along with a pre-calculated monthly ‘top up’. The landlord is charged a management commission of 12% of the monthly rent. The top up is held in a secure account and at the end of the option period the top up is used as the Tenant Buyer’s deposit to purchase the property.

What if I change my mind or choose not to sell the property?
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Once the Tenant Buyer moves in, the landlord cannot contractually walk away from the transaction.

If the landlord does not follow through with the sale, the Tenant Buyer will be entitled to his or her top up returned once any repairs have been taken care of.

 

Worked Examples

Examples of existing Rent to Own properties

worked example

2 bed mid terrace

Property type

96,000

Agreed future purchase price

5 years

Option term

£500

Monthly rent

£160(£9,600 after 60 monthly payments)

Monthly top up
(Stock photo used for Tenant Buyer’s privacy)

The Tenant Buyers are four years and six months into their option period as of June 2018. The Tenant Buyers have zero arrears on the rent and the top up. They have decorated every room in the property and have laid new carpets downstairs.

The Tenant Buyers are a young couple with one child who wanted to get on the property ladder. The husband had a good job working for the local authority but had a poor credit rating from a missed phone bill three years ago. The Tenant Buyer’s struggled to get a mortgage due to the husband’s poor credit rating and only had £4,000 in savings. Although the Tenant Buyers could have borrowed from their parents, the real issue was the low credit score.

Rent to Own has helped the young couple move into a property that they would have otherwise never had the opportunity to own.

Demand for this property was extremely high, with twelve couples applying and making offers for it and many other viewings taking place.

worked example

3 bed semi

Property type

£108,000

Agreed future purchase price

6 years

Option term

£525

Monthly rent

£150(£10,800 after 72 monthly payments)

Monthly top up
(Stock photo used for Tenant Buyer’s privacy)

The Tenant Buyers have lived in the property for four years and have norent arrears or top up arrears.

One of the Tenant Buyers had a poor credit rating stemming from the breakdown of a previous marriage. The Tenant Buyer’s partner also had a County Court Judgement obtained against her two years ago. The couple were therefore not very attractive to mortgage lenders and had very little opportunity of home ownership.

Having applied via Rent to Own and chosen their desired property, the couple opted for a six-year option period to allow sufficient time for the County Court Judgement to be removed from the Tenant Buyer’s record. The Tenant Buyers also wanted an extra twelve months to accumulate top up payments towards their deposit. In this instance the landlord was happy to oblige the Tenant Buyers’ requests and is due to benefit from an increase in the price of his property compounded at 4% per annum over a six year period, an increase in capital of over 25%.

worked example

3 bed detached

Property type

£120,000

Agreed future purchase price

5 years

Option term

£550

Monthly rent

£200(£12,000 after 60 monthly payments)

Monthly top up
(Stock photo used for Tenant Buyer’s privacy)

The Tenant Buyers moved into the property two years ago and have no rental arrears or top up arrears, making both payments on time every month.The Tenant Buyers have installed new windows throughout along with wallpapering and painting the property throughout.

The young couple with two small children wanted to get on the property ladder but due to a County Court Judgment obtained against the husband five years ago, the couple found it almost impossible to obtain a mortgage.

The Tenant Buyers have substantially improved the property and as a result of increased personal savings, the Tenant Buyers have expressed an interest in exercising their option to purchase the property early.

We are in negotiation with the landlord on behalf on the Tenant Buyers to determine if an early exercise of the option can take place.

Contact us

If you would like more information on Rent to Own, please complete the form below and a member of the team will be in touch. Alternatively, you can contact us by telephone on 0191 527 4007.



Rent to Own has helped me become a home owner. That is position I never thought I would be in 5 years ago.

Anonymous - Proud home owner