How does rent-to-own work?

Buying a home is a very important decision that requires time and a certain amount of savings. Two reasons that, on many occasions, are responsible for not being able to carry out the operation in the short term.

Therefore, there is a type of contract that can become the perfect tool for both tenants and owners. What is it? The lease with option to buy.

As a result of the rise in rental prices, this modality has become very important in recent years in Spain.

Rental with option to buy

We are talking about a mixed type of contract consisting of:

• A contract containing all the conditions pertaining to the rental of the property.
• A contract with all the aspects related to the purchase option.

As they are two subcontracts, the rental contract is governed by the Urban Leasing Law (LAU) and the regulation of the purchase contract is contained in the Civil Code.

In this way, the tenant has the right to live in a rented dwelling for the time established in the contract, which usually lasts between two and five years.

At the end of this period of time, you may decide whether to purchase the property at the price previously agreed with the owner. In that case, the final sale price will be partially or totally discounted from the rental payments made up to that moment.

Advantages of rent-to-own for the tenant

Among the main advantages of this type of contract for the tenant, we find:

• Saving for the purchase of the property. It means a gain of time to collect all the necessary money in the case of finally acquiring the property.

• Ease in granting a mortgage. In general, the banks value very positively that the applicant has already paid a part of the house at the moment of granting a mortgage.

Advantages of rent-to-own for the homeowner

For the owner side, we also find a number of benefits that make rent to own an interesting alternative. For example:

• Speed in the commercialization of the property. Without renouncing in any case to the sale, this modality allows the owner to increase the number of possible interested parties.

• Tax advantages. The owners of a property in a rent to own regime benefit from the tax advantages for landlords with deductions in expenses such as:

• State taxes and fees.
• Upkeep and maintenance expenses.
• Amounts for services or supplies.

In addition, they do not pay sales taxes until the moment the deed is executed.

Have you just made the decision to rent an apartment? Do you intend to buy to rent? From KM2 Real Estate Services – real estate agency in Barcelona and Madrid – we want to help you!

We have more than 41 years of experience in the real estate sector and we are very knowledgeable about the market.

Our team of commercial advisors will not stop until we find the perfect tenant, we are waiting for you!