The traditional path to home ownership can be long, arduous, and full of financial obstacles. With the help of a rent-to-own contract, however, you can enjoy a smooth ride towards renting and owning the condo of your dreams, in as little as a year.
Sounds unrealistic? Then this guide is for you. With the help of the real estate experts at DMCI Homes, you can discover exactly what this exciting process is so that you can incorporate it into your own long-term investment plans.
Learn more about the benefits, opportunities, and challenges of this process right now. See what’s in store for you at DMCI Homes’rent-to-own properties when you take a look at this comprehensive guide today.
Is it a good idea to go for rent-to-own homes?
A rent-to-own (RTO) condo contract is an agreement where you rent and live in a property, with the intent to buy said property by the end of your rental period. This setup is a good idea for people who want to become homeowners, but face financial barriers that prevent them from buying their property of choice upfront.
Investing in RTO property means you can live in your future condo home right away. With this setup type, you can see what it’s like to live in your dream space without immediately spending for things like a downpayment or mortgage. It’s generally a good idea to go for this contract type, especially in the Philippines where the real estate market is brimming with RTO opportunities.
Is rent-to-own in the Philippines a good idea?
If you’ve always wanted to be a homeowner, but you still need to work on building your finances, then moving into an RTO condo in the Philippines is a good idea. Not only will you be able to settle into your home early, but you’ll also get to practice good financial management with all the planning, communication, and coordination you have to do throughout this process.
Even with a setup that’s unique to buying or renting, your rights as a Philippine tenant will still be protected under this rental process. You’ll get to experience both renting and buying a home in the Philippines, thus giving you a better understanding of how to manage your own property.
Ready to experience the ins and outs of the homeownership process? Read on to learn more about rent-to-own homes for your long-term real estate needs.
The rise of rent-to-own contracts
The idea of RTO has been around for a long time. With rent-to-own homes dating back to the 1950s and 1960s, people have been using this process to slowly build their confidence towards ownership for decades.
Currently, top developers like DMCI Homes offer great RTO options for prospective homeowners, giving rise to their popularity among millennial buyers. The reasons for this agreement type’s popularity often include:
- Flexibility - This type of contract creates a more flexible path towards home ownership, allowing prospective buyers torent their chosen condos while saving up for a future purchase over time.
- Affordability - RTO contracts require that your purchase price be settled before signing. You can therefore get away with a lower buying price than if you bought your property at market value, at the end of your lease.
- Personalization - Under this type of contract, you can personalize your condo right away without needing to take things down by the end of your lease.
- Financial responsibility - Because you’re already expecting to pay for your future home, you can build more financial responsibility by saving up, improving your credit score, and building equity through small payments.
RTO condo contracts are full of potential in today’s Philippine real estate market. Discover the benefits and opportunities of these condo types by continuing on to the next section of this guide.
Benefits of rent-to-own condos
There are tons of advantages to RTO homes for current tenants and prospective buyers alike. Beyond affordability, flexibility, and financial confidence, some of the top benefits of this contract type for tenants include:
- An affordable path to homeownership -If you’ve decided to make your condo your future home, then this setup should be the most affordable homeownership path for you. Not only do you get to live in your home right away, you’re afforded time to get your finances in order throughout your tenancy.
- Fixed future purchase prices -The way this agreement works is that your property’s sale price is final and cannot be changed. So even if property’s value increases over time, the seller cannot increase its price in the future. This means you can technically buy the condo unit for less than its current market value through this process.
- The opportunity to increase your credit score - RTO contracts give you time to become financially stable while anticipating an incoming property purchase. So use your time wisely by improving your credit score for a future purchase loan.
- Ability to build equity before ownership - If a percentage of your rent during the leasing period goes toward your final purchase price, then you can build equity - even just as a renter, and not an owner.
- Greater control over the property - Depending on your agreement with the current owner, you can renovate and design the home to your liking during your rental period, thus granting you greater control over your future home.
Meanwhile, the benefits of this agreement type for buyers include:
- Delayed full purchase - As is the nature of this agreement type, you get to delay the cost of your full property purchase, while still living in the home and building financial stability.
- Test-drive the property - If you plan on pursuing a lease-option contract, then you can afford to test drive the condo to see if it really is the right fit or not for your future homeownership needs.
- Locked-in real estate prices - As mentioned earlier, you can lock in your buying price early on with this type of agreement. Regardless of whether its market price fluctuates or not, you can be assured that buying your unit will cost the same as when you started living in it.
- Limited financial commitment - By choosing between a lease-option or lease-purchase agreement, you can limit your financial commitment and find the contract that perfectly suits your monetary needs.
- Diverse investment opportunities - This real estate investment opportunity will help to diversify your portfolio, thus allowing you to lease, sell, or continue living in the home in the future.
Interested in pursuing this type of investment to achieve your home ownership dreams? Then prepare for the various opportunities and challenges that you may face with an RTO agreement by checking out this guide’s next section.
Opportunities and challenges for rent-to-own in the Philippines
RTO offers a lot of interesting opportunities for prospective buyers, but it can also garner serious threats. The opportunities for this kind of contract include:
- Flexible payment terms - You can make use of this agreement type’s flexibility so that you can negotiate payment terms and schedules for costs such as your condo’s down payment, real property taxes, and the like.
- Stability amidst the housing market - Once you lock in your purchase price, you can bask in the stability of said price amidst a fluctuating and potentially unpredictable housing market.
- Rental income for developers - Through RTO, developers can also generate rental income from tenants while ensuring a future sale. This present and long-term income stream can be beneficial for financing construction and maintenance for the future owner’s benefit.
- Property appreciation - If you’re considering leasing out orreselling the condo after your own rental and purchase, you can talk to your real estate agent to see what its value and appreciation potential are for the future.
The challenges of this agreement, on the other hand, include:
- Regulatory complexity - Avoid getting sucked into a faulty contract by having a broker or real estate agent review your agreement. This will ensure it complies with complex real estate regulations, protecting the interests of both the buyer and the seller.
- Economic volatility and market speculation -The Philippine economy can be volatile, and real estate developers may face difficulties if its real estate market experiences a downturn. RTO agreements can be sensitive to these economic fluctuations, so keep an eye out for them - and stay in touch with your real estate developers too, just in case.
- Hidden costs - Given how big of a financial commitment homeownership is, it’s important to take note of hidden costs and condo fees such as real property taxes, repairs expenses, parking, and the like so that you’re not blindsided by any of them in the future.
- Risk of default - If you encounter financial difficulties during the leasing period, you may run into the risk of defaulting. Make sure to talk to your real estate agent to set contingency plans in place for this scenario.
By knowing all these risks and benefits, you can make a more well-informed real estate investment decision that will lead you to achieving your ownership goals. You can also discover more tips and offers for a great RTO experience with DMCI Homes’ Home Ready™ program today.
Discover a homeownership path that works for you and your unique needs with a rent-to-own contract today. Here are some final tips for you to consider when you begin your RTO path with DMCI Homes in the future:
- Prepare for the long haul. Plan several years ahead so that you can prepare your finances and save up for the needs of a home, even beyond your point of purchase.
- Enact financially responsible practices. Not only will this improve your chances of purchasing a condo, these will also provide you with the financial stability you need throughout the rest of your life.
- Gather a team of advisors. Get in touch with expert real estate professionals, like the ones at DMCI Homes, to guide you through this long-term process and ensure your success in the future.