# www.Rent2own.ie - what do you think?



## ApplePie (13 Sep 2006)

Hi all, I came accross this website through a local newspaper ad in the last few days. It looks very interesting but I feel there must be a catch!
Has anyone used this website, or similar?? 
There's another group of websites called rent2buy.com/co.uk etc but I don't think rent2own is connected in any way other than the idea.
Looking forward to your comments,
Sarah


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## CmTaz (14 Sep 2006)

At first glance the catch is that you pay 2% of the purchase price to them as a fee which will be deducted off the eventual purchase price. It does not state that the eventual purchase price will be what they have paid for it now so safely assume that there will be an element of profit here above the 2% that they will be refunding :

If the property price goes down and the buyer does not follow through then they still have the 2% fee that was charged. Presumably they have the csh reserves to sit through a downturn and upturn cycle in the market.

If it goes up over the years then they have the profit made plus the rental income of the 5 years it takes ( again assuming rental payment will be earning more than interest they are paying financing if they are borrowing at all )

All that said it's not a bad way for people to get on the ladder if the future sales / rental figures are reasonable.


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## MugsGame (14 Sep 2006)

Could be an interesting way to hedge against a severe drop in house prices -- lock in the "current" price with an option to walk away after "renting" for up to five years. Not clear how current price and rent are arrived at though. The tax treatment (stamp duty on eventual purchase) could also be interesting!


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## ApplePie (14 Sep 2006)

Thanks for your replies. I'm thinking that it looks like a really great way to get on the ladder, especially if you know your income is going to increase in the future.
Has anyone out there in AAM land rented/purchased under such a scheme??


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## Tony (14 Sep 2006)

lets say you find a property worth 400k through this scheme and agree to buy it in two years but in two years because of some property slump it is only worth 300k, who on earth is going to give you a mortgage for 400k on a property that is only worth 300k? 

There isnt enough info about this scheme on the site, its an ok idea in principal but there is a lot of dodgy terms and conditions i'd say.


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## room305 (14 Sep 2006)

Tony said:


> lets say you find a property worth 400k through this scheme and agree to buy it in two years but in two years because of some property slump it is only worth 300k, who on earth is going to give you a mortgage for 400k on a property that is only worth 300k?



Question is, why on Earth would you  want to buy a house worth €300k for €400k? Surely in this situation you would walk away once your rental lease had expired.

Seems to me like the company is banking on capital appreciation, otherwise their business model makes no sense.


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## ClubMan (14 Sep 2006)

room305 said:


> Question is, why on Earth would you  want to buy a house worth €300k for €400k?


Yeah - only many foreign property investors do that!


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## Tony (14 Sep 2006)

room305 said:


> Question is, why on Earth would you want to buy a house worth €300k for €400k? Surely in this situation you would walk away once your rental lease had expired.
> 
> Seems to me like the company is banking on capital appreciation, otherwise their business model makes no sense.


 
Well unless they are completely insane i'm sure the company would tie you into a legally binding contract that you MUST buy the house at the end of your contract no matter what it is worth, i'm assuming that the company safeguards against property depreciation to make sure that they are not stuck with it at the end of the contract.


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## xt40 (14 Sep 2006)

this is no different than a share option transaction. the idea was mentioned to me by someone i know that went to some of those be a property millionaire seminars. there is a potential upside for both parties.

the company - 
guaranteed rental income for x years. 
either guaranteed sale at a price eg 25% of todays values or they keep the option premium of 2k. 
this contract is then used to raise finance to acquire more properties but if there is a major downturn, they probably dont have any reserves and would rent the properties out to new tenants.

the tenant
if 8-10% compound growth is expected, they can lock in the price today for a small premium which guarantees the right (not obligation) to buy the property at a price which equates to eg 5% annual growth over todays prises. if the market grows they cant lose and get a cheap house. if when the time comes, the deal is not attractive they simply walk away and forget about the 2%.

this is all very common with us shares


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## room305 (14 Sep 2006)

Yup, "call" and "put" options are very common in the share world. Couldn't see how the tenant would be obliged to purchase something at greater than its market value. At the end of the lease I'm assuming you can walk away forsaking your 2% premium. You might even be able to renegotiate to buy at the current market rate.

Interestingly, from a revenue perspective, stamp duty may be liable on the 2% premium, even if it is a new build and/or you are a FTB. Also, should you buy, the property will likely be classed as a second-hand home.

Whether the revenue will be willing to refund the stamp duty once you purchase (if you are a FTB and so are SD exempt) seems to be a bit of a grey area.

Definitely one to get good legal advice on from a stamp duty perspective.


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## room305 (14 Sep 2006)

Contacted OSP. There is no option to renegotiate the price on the contract but the tenant can walk away at the end of the rental lease if they wish. They will just forego their 2% participation fee.


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## firsttimebuy (22 Apr 2008)

Just wondering if anybody has bought a house through this scheme?


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## wazee1974 (22 Apr 2008)

This Scheme has been going for a few years in the UK. It's aimed at 1st time buyers sturggling to get there foot on the ladder. It usually attracts proffessionals and what they call key workers. It is a good idea if your struggling to get a property. It also means its easier to budget for cos you have set outgoings.


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## firsttimebuy (22 Apr 2008)

Got this reply from Rent2own

We will decide the rent you pay each month and the normal rent in the area will be allocated as rent and the balance of the rent will be deducted from the agreeded price of the house


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## bubbles61999 (22 Apr 2008)

just came in on the thread, i would ask some serious questions prior to jumping into this.

Who defines the purchase price?
can you handle the idea that maybe they haggled a cut down price, (quite possible in this market, *not meaning to discuss house prices*) and that you are paying an inflated price, that you don't get a chance to negotiate at the end of the term.
its very easy to say that you can walk away if the price is too high, but am imagining that if people take this at its face value, "buy" their dream house, will it be easy to just "walk away"? is that what the company are hoping for?
do you have to see out the full term before you can "complete" the sale?
does someone who finds it hard to get on the property ladder at the moment really want to throw away 2% on a property that in theory they won't want to own if it has fallen in value by the time their contract has lapsed, wouldn't it be easier to simply keep your 2% and build it to the 10-20% that is realistically required by banks for a mortgage?

i can understand how it may look to be a smaller risk to take and maybe on the face of it, it is, as long as their is no emotional attachment to the house. i will admit as someone who is waiting in vain (it seems) to sell, if i had seen this a few months ago i would have jumped at it, to secure a house that i'd fallen for, but considering the current market, it probably would have been a bad idea.


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## CreditCrunch (22 Apr 2008)

Is this the same as [broken link removed] ?


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## OneLife (23 Apr 2008)

Have you seen this scheme that a developer is selling down in Cork....

Seemingly a lot more transparent - assuming the marketvalue of the properties is a true reflection.


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## hotredhead (23 Apr 2008)

At first glance it looks very interesting,but obviously there is a need for more transparency.I can't help but wonder are we going to see a lot more of these schemes in the future with so many houses lying idle.It seems like a good idea in principle.


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## corcaigh2008 (23 Apr 2008)

The one in Cork seems better from the info availible, i like the fact that all rent paid will be taken from the purchase price. The only way to know how good these schemes are will be from the experiences of anyone who goes through the process.


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## cjh (23 Apr 2008)

ApplePie said:


> Thanks for your replies. I'm thinking that it looks like a really great way to get on the ladder, especially if you know your income is going to increase in the future.
> Has anyone out there in AAM land rented/purchased under such a scheme??




Can you explain what you mean by "Get on the Ladder?"


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## aquaceri (24 Apr 2008)

I had applied for this but as soon as the market started to drop, they called me to say they were booked up...there is a catch....you agree a price and if the house prices drop your fecked basically and your rent will be higher than the average rent. 

its a good idea if you have absolutley no hope of getting a proper mortgage, i thought for sure as a single mum who was only in full time employment for 2 months i didnt have a hope in hell of getting a standard mortgage but four months later I am signing contracts tomorrow.

They wont accept your application at the moment for rent2own as they know they will lose out agreeing house purchase prices the way the market is at the moment! of course its a scam they wouldnt make any money otherwise! its an absolute last resort i would say!


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## BurritoQueen (21 Jun 2008)

Rent to Own sounds brilliant....but in a down turn property market this scheme may backfire for me if we agree to a purchase price now yes?


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## BurritoQueen (21 Jun 2008)

Does anyone know where to download an Irish rent to buy agreement?


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## Complainer (22 Jun 2008)

How enforceable is the agreement to buy? If there happens to be huge growth in the market, could the organisers of such schemes (with no disrespect to rent2own.ie) simply walk away and hold onto the gains for themselves? With very large sums of money involved, there would need to be excellent corporate governance in place.


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## BurritoQueen (23 Jun 2008)

Yes the rent-to-own is an area that requires tight regulation. 

As far as I know when you sign the contract to rent with an option to buy at the end of an agreed period of time, say 3 to 5 years and a significant portion of the rent, say 50% (if the rent is €600 ususally another €500-€600 per month is allocated to the purchase price) and if the purchase price for the house is agreed in writing within the contract. Then the seller is locked in to sell the house to the buyers per the terms of the agreement. Then the buyer is only legally locked into the terms of the lease but has the choice to 'opt out' of buying at the end of the term. The motivation for the buyer to adhere to the agreement is that they lose their deposit and all the 'rent' money allocated towards the purchase if they don't proceed...... Is this how it's done here in Ireland?


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