How Rent to Own Properties Work in the Philippines

Rent to Own Condo Units in Northpoint Davao

In today’s difficult market, buyers and sellers may find that participating in a rent-to-own scheme is the best option.

Today’s market is saturated with real estate properties, making it difficult for sellers to find prospective buyers. Additionally, there are times when cash-strapped buyers who take out a mortgage have difficulty securing a loan for one reason or another. As a result, they are unable to purchase the home they desire.

What is Rent to Own or RTO?

Couple Moving to a Rent-to-Own RFO Condo | Affordable Condo Philippines | Camella Manors
Couple Moving to a Rent-to-Own RFO Condo | Photo from Hiveboxx in Unplash

Rent-to-own (RTO), also known as lease-to-own, is a type of agreement that allows an individual to purchase a leased property from the owner within a specified time period. This simply means that a buyer may rent a home with the option to purchase it at the end of the rental period or until the loan’s term expires.

However, how exactly does the rent-to-own scheme work in the Philippines?

Both parties must specify the monthly rental, purchase date, sales price, and other terms such as the interest rate at the outset of the arrangement. After they have agreed on the terms, they draft and sign a contract.

In contrast to conventional financing, rent-to-own is owner financed, which means that the owner provides financing to buyers. As a result, lessees pay a slightly higher rent than market rate. This is because a portion of the rent will be used to cover the down payment on the property if the lessee chooses to purchase it. In this case, he or she must secure financing for the remaining balance, either through a bank or another lending institution. If the lessee decides to vacate the premises, the lessor retains all rent paid, which is his or her incentive for taking the property off the market while it was rented.

Regarding the sales price, keep in mind that whatever price is specified in the contract is final and cannot be changed regardless of whether the property’s value increases or decreases during the lease period. Therefore, before you sign any contract, ensure that you understand what you are agreeing to.

Which party benefits the most—the purchaser or the seller?

Both parties benefit from this type of arrangement. Buyers can immediately purchase a home and are given time to rebuild their credit. Sellers who have their property on the market for an extended period of time are able to generate income to pay off their mortgage and property taxes.

Another advantage is that buyers can “test drive” the home and walk away at any time before or on the day of the purchase. Meanwhile, sellers incur no loss if the lessee decides not to purchase, as the sale price has already been agreed upon.

Appropriate for a Permanent Address

While renting a property in the city does not guarantee that you will eventually own it, if you obtain an RTO condo, your payments will not be wasted because you will have the option of purchasing the property. Additionally, owning an RTO condo unit equates to having a permanent address, as opposed to renting a unit that you will never own and whose likelihood of being evicted is entirely dependent on the lessor or landlord.

You are protected as a rent-to-own property buyer by rent-to-own terms and conditions.

What are the potential stumbling blocks?

Date of Payment

Any financing arrangement entails some level of risk. These can be avoided if both parties, the buyer and the seller, make certain that all critical points and concerns are addressed in the contract.

A disadvantage for buyers is that if they choose not to purchase, all rents paid will be forfeit. Another issue is that if the home’s value depreciates during the rental period, the renter may end up paying significantly more than market value for the property. A third disadvantage is that if the lessee falls behind on rent, he or she may be evicted, forfeiting the down payment and all previous rent payments. Finally, there is the possibility that the lessor will be unable to pay the mortgage, in which case the rent paid will be forfeited and the potential buyer will be unable to purchase the property.

Additionally, there is a disadvantage for sellers. Because the sales price is fixed from the start, they will miss out on any price increases or property appreciation that would benefit their tenants by allowing them to purchase the home below market value.

A well-written contract can help you avoid future disagreements.

Rental Contract

There is no limit to the number of provisions that can be included in a contract. However, whether you are the buyer or seller, ensure that you protect all of your interests to avoid future legal conflicts. If necessary, retain the services of a lawyer to thoroughly review the contract prior to signing.

Apart from the fundamental terms such as the monthly rental rate, the purchase date, and the sales price, both parties must agree on pet policies, the maximum number of tenants permitted in the home, and future improvements.

Additionally, because a rent-to-own agreement is complicated and unusual, it would benefit both the lessee and lessor to review RA 9161 or the “Rental Reform Act of 2002” in order to gain a thorough understanding of the laws governing RTOs in the Philippines and avoid any unheard-of violations.

Check Camella Manors Rent to Own Condo in Northpoint Davao

RFO Condo in Davao - Northpoint Davao - Camella Manors - A pine-filled condo community
RFO Condo in Davao – Northpoint Davao – Camella Manors – A pine-filled condo community

Northpoint Davao is one of the flagship properties offered in Camella Manors. Recently, the project offered rent to own or RTO condo units available in its ready for occupancy condo buildings. The project is specifically located along Davao’s central business district along JP Laurel Avenue, Bajada.

Inside its 3-hectare British-themed condo community are five condo buildings that are enveloped in numbers of Caribbean pine trees. This award-winning property development offers competitive financing terms from regular financing, bank financing and now with its rent to own scheme awaiting every privileged investor in and out of the country.

With a down payment of as little as PHP66,000, the property buyer can easily relocate to Northpoint Davao. The rental fee and an amount to be deducted from the purchase price of the principal property will be included in the property buyer’s payments.

If you are looking for the best rent to own condo in Metro Davao, talk to our marketing officers via our inquiry form or directly message us through our official website and social media channels.

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