With a sizeable English speaking young population and the boom in BPO companies working in information technology sector, Manila has become very important for young Pilipino. These young men and women and couples prefer to live in condominiums that have come up in large numbers in the Philippines capital Manila. Sensing the need for housing among these young professionals, many developers have built condo projects in Manila. Living in a condo proves very convenient for young professionals as these residential buildings are located in prime locations in Manila. But high rents start to pinch financially in the long run. This is the reason why more and more of these renters are going for ‘rent to own’ option these days. What is this rent to own or lease to buy option and why has it become so popular among young professionals and couples? Let us find out.
Owner himself finances for the down payment
Rent to own (RTO) is an agreement between the tenant and the owner of a condo whereby the tenant gets the right to purchase the property after a specified period of time. Till then he continues to pay the rent to the owner. It is no secret that young professionals and couples coming to Manila to work in BPO firms or other multinationals are cash strapped and do not have the money to buy the condo they are living in. They know that they cannot get mortgage from a bank for buying the condo and arranging the down payment is also a big problem for them. In such a scenario, rent to own condo option proves to be a good way to own a property in Manila for them. It is a win-win situation for condo owners also as they are able to sell their property at desired asking price.
Alluring prospect for the lessee as he pays nothing from his pocket
For the tenant, rent to own is a very alluring option as it is financed by the owner of the property himself and he does not need to secure a loan from a bank for buying the condo. The draft agreement of rent to own condominium specifies all details regarding purchase price, date of purchase, monthly rentals, and other terms and conditions deemed fit by the owner and the tenant. As RTO is financed by the owner himself, the monthly rent agreed upon by both parties is higher than the market rate. The lessee knows that a portion of this monthly rent goes to serve as a monthly installment for the down payment of the property. The down payment having been arranged, the tenant now has to worry only about the remaining balance that he has to pay much later at a specified date.
Excess rent is forfeited if lessee declines to purchase later
The lessee has to forego all the money he has paid in the form of excess monthly rent if he decides not to purchase the condo in future. This in a way is justified as the owner of the condo kept his property off the market for so long. Purchase price is always mentioned in a rent to own document and it cannot be altered when the time comes for the lessee to make the payment for the balance amount. This amount remains unchanged irrespective of whether property prices in Manila have increased or decreased in the mean time.
Great way to own a condo in Manila
Rent to own agreement is beneficial for you as a tenant if you love the property and its location. It is a boon for you if you are cash strapped and do not have the means to arrange for the down payment to secure a mortgage from a bank. You know that you are paying a monthly rent higher than the market rate but you also know that you are paying the owner the down payment for the condo in this manner.
In addition to these rent to own condos, there are also available rent to own condos where you are required to pay a certain down payment in advance to be given a chance to purchase the unit at a future date. If you have a stable job and you also intend to stay in Manila after marriage, rent to own is a good option for you that you must explore. However, you must weigh all the pros and cons before entering into an agreement like rent to own.
There is another option for you to pay the monthly rent once you get hold of a rent to own condo in Manila. You can simply rent it out to another individual or family and pay your monthly obligations form this rent. In cases where down payment is compulsory, the condos are in a good location and they are also better in quality than ordinary rent to own condominiums.