Renting with an option to purchase: a good compromise

Published on by Association des Propriétaires du Québec

Topic(s): Real estate

Source: Argent

Renting with an option to purchase: a good compromise

Renting with an option to purchase could well constitute the next great market trend in real estate.

 

It should be said that for new purchasers confronted with the burst in prices for houses and the tightening conditions of mortgage credit, it is a solution that arrives right on time.

 

In Toronto, the Daniels Corporation hopes to benefit from this tendency. The promoter, who affirms being the only one to propose this type of contract in the metropolis, has launched a renting offer for an apartment with option to buy within the framework of his real-estate program NY Place Boutique.

 

The operation seems to have received an excellent reception on the market, according to the Daniels Corporation. In the majority of the programs of renting, part of the monthly rent is devoted to the possible purchase of the housing, in general at the end of three years.

 

This way of getting access to property makes it possible for everyone to be a winner, because, contrary to cars or electric household appliances, houses or apartments increase in value over time.

 

The promoter has a better guarantee that the sale of the housing in which he has invested will be carried out. If, indeed, the tenant does not exert his option to buy, he loses the paid sums. It is thus in his interest to go all the way right until the end of his undertaking.

 

Leasing with an option to buy does not fit everyone, however, according to Roy Singh, real-estate agent at Century 21 in Waterloo, in Ontario. “It addresses itself rather to those who have a small momentary problem preventing them from securing a mortgage loan, and who need a little time.”

 

According to new rules enacted by Ottawa, a mortgage loan cannot be granted to a person having gone bankrupt until three years after this person started to restore his credit rating. Independent workers will have, as for them, to be established for at least two years.

 

Roy Singh regrets that the solution of leasing with option to purchase is not better known by the public. There would be even more promoters ready to invest in this field than there are tenants available.

 

On the 12 rental buildings managed by Mr. Singh, five are part of programs of leasing with an option to buy and the latter, he estimates, cause the least concern.

 

If a tenant decides, for instance, not to exert an option to buy at the date envisaged, the investor is protected from a loss in value. It will indeed be enough for him to sell the housing to someone else by using the sums paid by the tenant to cover the expenses of the transaction.

 

“The salesman does not make a big profit thanks to the renting, but can make one thanks to the increase in the price of the real estate,” indicated Mr. Singh.

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