If you’re living in a rented property and dreaming of owning your own home, you know how challenging it can be to save for a down payment while paying rent every month.
What Is Rent to Own?
It’s a contract between a property owner and a tenant in which they agree that the tenant has the option to purchase the property at the end of the lease period.
It also prevents the owner from offering the property for sale to anyone else during that time.
Once the lease term is completed, the tenant must decide whether to exercise the purchase option or forfeit it.
In Guatemala, the Leasing Law was enacted in 2021 to regulate these types of transactions that were previously conducted without a legal framework.
How Does Rent to Own Work?
In this arrangement, the tenant pays monthly rent to live in the property for a specific period, usually ranging from one to three years.
During this time, the tenant has the option to buy the property at an agreed-upon price.
If the tenant decides to buy the property at the end of the lease period, a portion of the rent paid is typically considered as a down payment for the purchase.
Additionally, sometimes a fraction of the monthly rent is allocated as a form of “savings” that will be used as part of the final price.
In some cases, owners may require payment of a premium to secure this type of agreement.
Whether this premium is refundable or not if the tenant-buyer chooses not to proceed with the property purchase depends on the specific terms of the contract both parties signed.
Advantages of Rent to Own for Tenants
1. Saving for the Purchase
During the rental period, a portion of the rent can be applied toward the purchase, allowing tenants to accumulate a significant amount for the down payment.
2. Stability
By signing a rent-to-own contract, tenants have the assurance of not facing eviction as long as they meet the terms of the agreement.
This stability allows them to settle in the neighborhood without worrying about relocating in a short timeframe.
3. Potential Value Appreciation
If the property’s value increases during the lease period, tenants benefit from this appreciation when buying, potentially gaining from the property without taking on the risk of a traditional mortgage upfront.
4. Negotiation Flexibility
Some rent-to-own contracts permit negotiations regarding the purchase price and conditions at the end of the lease.
This means tenants may have the opportunity to secure a better price or more favorable terms when acquiring the property.
