Rent with option to buy

What is rent with option to buy, and is it for me?

A “rent with option to buy” arrangement in Costa Blanca, Spain, allows a tenant to rent a property with the option to purchase it at a later date, typically within a specified period. Here’s a brief overview of the pros and cons of this arrangement:

Pros:

Flexibility: It provides flexibility for people who are not ready to commit to purchasing a property immediately but want the option to do so in the future. This could be due to personal reasons, or financial reasons, i.e. due to lack of the full down payment needed in order to access the necessary finance.
Test Drive: Renting with the option to buy allows tenants to "test drive" the property and its location before making a long-term commitment.
Price Lock: The purchase price is usually agreed upon upfront, allowing tenants to lock in the price even if property values increase during the rental period.
Equity Building: Rent payments may be fully or partially credited toward the eventual purchase price, helping tenants build equity over time as both the initial down payment, and the monthly payments will be discounted from the agreed purchase price at the time of signing. The banks will also calculate this into the figures of total initial down payment.
Savings on interest: Typically, with a rent with option to buy, the percentage requested in the form of a mortgage upon signing the deeds, will be lower than the average mortgage.
The money you have managed to build in equity over the agreed period will be discounted from the purchasing price, resulting in thousands saved over the years in extra interest, had you needed to finance that amount from the start.

Cons:

Non-Refundable Option Fee: Tenants typically pay an option fee upfront, which in most cases will not be refundable if they choose not to purchase the property.
Higher Rent: Rent prices in rent-to-buy agreements may be higher than standard rental rates, as all, or a portion of the rent will be discounted from the future purchase.
Change in personal circumstance: While the option to buy provides flexibility, and a lot of positive aspects, you will have to factor in a possible change in your personal circumstances. If you decide not to, or cannot fulfill the purchasing agreement upon the end of the agreed period, legally, the owner has the right to keep the money and request you to vacate the property.
Property Condition: Typically, you will be responsible for maintenance and repairs during the rental period, as well as any communal fees, IBI payments and rubbish collections, even though you don’t yet own the property.
Limited offers:
You probably won’t find many rent with option to buy listings online or in many estate agencies, as a general rule, they take a lot more take a lot more negotiating and work than a normal sale, as there are many more aspects to agree upon than just the sale price. The result is few agents spend the time to work on these transactions, which in return allows for very little experience and knowledge on the matter. You will also notice you can’t even search for this transaction on the main property portals.

How we can help:

It is important to understand that rent with option to buy in Spain is a fully legal option, and any agreement will be signed before a notary as you would a normal property purchase. However, the property will not change ownership until the official signing of the deeds.

Rent with option to buy isn’t particularly difficult or complex, but it does require a level of knowledge on the subject and legal aspects in order to successfully bring together both interested parties, and this also involves a lot more negotiating than a normal sale, as both buyer and seller will have their particular requirements to agree upon.

Costa Prime Properties has many years of expertise in facilitating rent-to-buy agreements in Costa Blanca, Spain. Our team can help clients navigate the complexities of such arrangements, ensuring that all terms and conditions are clearly understood. With our knowledge of the local real estate market and legal requirements, we can assist clients in finding suitable properties, negotiating terms, and managing the transaction process from start to finish. Additionally, our expertise allows us to provide valuable guidance on maximizing the benefits of rent-to-buy arrangements while minimizing potential risks.

If you are interested in learning more about rent with option to buy and how we can help you, please get in touch.