Want the Benefits of Cash-Flow from Properties Without all the Tax Liabilities?

“Why would someone want to do a ‘Rent-to-Own’?”

People would like to do a Rent-to-Own for a bunch of different reasons.

First of all one of the greatest reasons is that they get control of a piece of property and they can do things with it, before having to take eventual ownership to it. Now that could be that they get control of a property and they get to renovate it, they get to fix it, they get to clean it up, and whilst they’re doing that, they’re not incurring all the normal ownership costs that they’d normally have incur in order to do that.

One of the areas people seem to do this a lot are contractors, they’ll come in, they’ll buy a property on a rent to own, it enables them to use their contracting skills to get in, increase the value of the property, sell it, make a profit, without having to take on the ownership burden upfront. So, normally when someone takes on the ownership burden, they’ve got to pay the stamp duties, and they’ve got to pay the bank fees and all this sort of stuff, well with a Rent-to-Own, you can go in there and control it, you can renovate it, you can do whatever you need to do, to increase it’s value, but all those owners responsibilities are no longer with you, they are with the seller who still owns the property.


What about rates?

Quite often this is still held and paid for by the seller while you’re in there on the rent to own basis. The other thing is to, you get to try before you buy.

Example

When buying women’s shoes. Women’s shoes are pretty expensive and there’s nothing worse than paying a lot of money on an expensive pair of shoes that after a few weeks kill your feet. Imagine if you could go to the shoe shop, and rent the shoes for a while and if you liked them, you could pay for them, but if you didn’t you could hand them back.


That’s what happens with rent to own. It enables you to get it, and try a house on or try a property on, decide if you like it, and if you like it, you keep it, and if you don’t you can hand it back.

Example

I had a house once that was facing south, it was a waterfront, but it faced south. What I didn’t know was, during the winter time, no sun whatsoever. The house got so cold, it was totally concrete, and at the end of a period of time, I decided that it wasn’t the house for me, but I could hand it back. I hadn’t already committed myself to the obligation of ownership, and what Rent-to-Own does, rent to buy says, it gives you the choice to, but not the obligation, if you don’t want to.

So is there a trial period involved?

When you get a Rent-to-Own, a Rent-to-Own will have a trial period in there, could be one year, six years, two years, six months, three months. Rent to buy, the parameters within it, can be all over the shop.


Who makes those parameters?

The buyer and the seller.


It has to be an agreement with both people?

Correct. The seller might say, I’ll give you a year to try this thing on. The buyer might say, I want two, and you negotiate from there. And the interesting thing about Rent-to-Own agreements, they’re never the same. If you got fifty people into a room to do Rent-to-Own agreements, none of them could agree on which was the best way to do them, because Rent-to-Own agreements all have variants and all of the variants will depend of the buyer and the seller, on the side of the road eating an ice cream, and deciding what everybody wants to get out of the transaction. When they figure out what they want to get out of the transaction, and get that put on paper, that becomes the terms of the Rent-to-Own, and every one’s going to be different.

It’s a mutual understanding of how things are.


When do you actually own the property?

Well this is an instrument you can use that does exactly the same thing. You go in there, you stay in there, you take advantage of the profits, and you move out. The advantage is, you didn’t take on board, all the obligations that would normally come with ownership. You didn’t take on board, all the liability for loan debt or whatever, that would normally come with home ownership, and you also didn’t have to take on board, all the fees and charges and costs associated with getting into the property. So it makes it a way to move into a property a lot less expensive than the traditional way. You still get to live in the property, you still get to do to the property what you want to do to the property, and when you exit, you can still benefit, from that relationship you had with the property. So that’s another great benefit for people. And, if you, at the end of the day, don’t want to take ownership, that’s ok too, you don’t have to. It just gives you more choice.

The other reason why people like rent to buy is that it’s a hidden asset. You see, you can have fifteen, sixteen or twenty rent to buy houses, but no one really knows that you’ve got them. It’s a quirky thing. See, a lot of people, especially in this day and age where people sue each other, a lot of people like Rent-to-Buy because they can build a property portfolio and it doesn’t really show up anywhere that they’ve got this property portfolio.


So that’s good when taxation time comes about?


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