Rent2Buy.ie Any experience?

aster99

www.rent2buy.ie

Anybody have experience of this? My first thoughts are that it seems good

bren2002

How can you possibly think it's a good idea?

From what I can see it's a dreadful idea for someone to take up.
You are agreeing to rent a house for X years (up to 5) at which point you then have an option to buy at a pre-agreed price. I can't see what the penalty is for not exercising the option, but I suspect there is one.

Why would you get involved in one of these desperate developer schemes?
Suppose you take up the option of renting for 5 years and buying at X. How do you know what the price of a similar house will be in 5 years. It could be 50% less than the current price, or it could be 25% less than the current price. Even if prices have recovered to 2008/9 levels, inflation will have reduced the price pretty significantly.

If you agree to buy at 2008/9 levels and it's only worth 50% of this price, how do you propose raising the other 50%? The banks won't hand out 200% mortgages.

Rent a house now for 5 years, save your money and buy when it suits you too. You remain in control at all times.

Simply my opinion, but as always - Cavet Emptor

jaffa20

:rolleyes:

What happens if the value of the house has decreased from the agreed price?

With the terms of the scheme there is no obligation on the purchaser to proceed with the purchase at the end of the agreed period. However it may be possible to negotiate a lower price with the owner, but they are not obliged to do this. Rent2Buy will assist with this process.
What happens if the value of the house has increased from the agreed price?

With the terms of the scheme the owner must sell to you at the price agreed at the beginning of the arrangement.


From rent2buy.ie


Ok, so if the value of the house value increases, they have to stick by the original price but if it goes down, you can negotiate with the owner after the rental term to lower the price.


i don't see a problem here and think it's a great idea because you don't have to commit to buy after the rental term is up and you only lose the money you paid in rent which you pay elsewhere anyway while trying to save.


At the moment, we are paying 1,300euro in rent. How are we supposed to save when we are throwing away dead money. This is a great scheme which allows your money (normally dead rent money) to go towards the huge deposits on houses.

Agent J

Will people in this country ever drop the perception that renting is "dead money"?

One of the major misconceptions that fuelled this celtic "balloon".

Renting provides a roof over your head and the flexability to move somewhere else.

When you pay a mortagage you are tied to the agreement and the interest you are paying is "renting" that money.

If you wish to argue the "but at the end you dont have an assest" with renting then consider all the people who will spend the next couple of decades in negative equity.

bren2002

Completely agree, rent is not dead money. Negative equity or interest is dead money. Rent is paying for a service, just like any other.

I rent an apartment in area I like for less than half what it would cost me to buy it.

spockety

I think both renters and owners need to appreciate the merits of each.

To be honest, my perception is that pro-renters are far far more rabid in their defence of renting than owners are in their defence of home ownership. The only place I have ever seen 'rent is dead money' being said is when a pro-renter says it as an unsourced quote!!

Renting is best for people in certain circumstances.
Home ownership is best for people in certain circumstances.

It's up to people to assess their own circumstances, weigh up each, and come up with the best solution for them.

(p.s. I rent, for now)

Arithon

spockety wrote: »

The only place I have ever seen 'rent is dead money' being said is when a pro-renter says it as an unsourced quote!!

Have a look further up in this thread :rolleyes:

My opinion with regard to the original question is that you would need to do your sums and see if it makes sense. If an offer seems too good to be true, it often is - so look for what fine details might be used to make others a profit at your expense.

I would recommend looking at how much more costly the rent is over five years (including deposit) when compared with renting on the open market (factor in possible loss of deposit as well).

Note also all the fine details in any contracts before signing - anything which ties you down in terms of cost or duration of agreement could be potentially costly down the line. If you're not sure exactly what you're signing, consider legal advice.

Agent J

I'd love to know who've youve been talking with. Rabid renters?

I tend to find that its usually recently bought home owners who are more rabid with people to get on the "property ladder" now before it gets more expensive. Trying to get more people on the giant pyrimad.

My initial response was to the 2nd poster who called renting dead money.

Renting with a view to buying isnt a bad idea in concept but with failing property markets the valuations of a property now will most likely drop so be prepared to drive a hard bargain.

However the numbers to consider for the moment is that the devlation of the housing market means you are saving money by renting instead of buying. Given the glutt in the rental market as well then unless you really want to buy and settle down better off to save and hold off for a while.

Arithon

Reading through their website, on the surface it looks like the biggest problem might be that the property will be worth less at the point where the sale is made. This currently seems likely.

If you believe you can negotiate a good deal at a lower price eventually, I wouldn't expect this, since there's no contractual obligation at all. When considering the deal, I think you should assume that the deposit and rent has to be written off in this scenario. Why shouldn't the developer just go to the market instead and pocket your deposit and rent?

The deposit is approx €3640 (including VAT), it's a fair chunk of change in a declining market. It does look from the website that this is all you would lose - but it's a lot of money to put on a bet that house prices will decline by less than the rent you put into the house.

Arithon

spockety wrote: »

The only place I have ever seen 'rent is dead money' being said is when a pro-renter says it as an unsourced quote!!

Found some sources (by accident) when looking through a certain website. You can see two sources referred by the rent2buy.ie website at http://www.rent2buy.ie/media.html - both The Corkman and another newspaper (not sure which, it's only showing sections of the pages) use exactly this phrase in ad-style articles about the scheme:

FUTURE tenants at The Beeches development in Boherbue will now have the option of turning their 'dead money' rental payments converted (sic) into all the bricks and mortar meaning of a mortgage thanks to a new offer available through the Rent2buy scheme.

A rent-to-buy scheme is obviously an attractive proposition for buyers, allowing them to get across the threshold of a new home immediately as well as putting their rent, which is normally seen as "dead money", to good use.

jaffa20

Arithon wrote: »

Reading through their website, on the surface it looks like the biggest problem might be that the property will be worth less at the point where the sale is made. This currently seems likely.

If you believe you can negotiate a good deal at a lower price eventually, I wouldn't expect this, since there's no contractual obligation at all. When considering the deal, I think you should assume that the deposit and rent has to be written off in this scenario. Why shouldn't the developer just go to the market instead and pocket your deposit and rent?

The deposit is approx €3640 (including VAT), it's a fair chunk of change in a declining market. It does look from the website that this is all you would lose - but it's a lot of money to put on a bet that house prices will decline by less than the rent you put into the house.

Exactly, you are only losing the deposit. Everyone on here is so cynical about buying in the current market but the properties on their website are priced to reflect the current market. I like the idea as you are not obligated to buy after the lease term so you are in effect still renting but putting a deposit towards the house if you decide to buy it after 2 years or whatever. Renting and trying to save doesn't work because most of your money is going towards paying someone elses mortgage. I really don't see the problem here as there doesn't seem to be a catch and this will give you an opportunity to see whether you are ready to buy and allow time to see if the market goes up, down or stays the same.

Arithon

Right, the financial downside seems to be the deposit (if prices drop). There's also a mobility cost if you have to sign a longer lease.

The upside is the part of the rent added as credit to the house value, minus the opportunity cost of not having the deposit amount over the duration of the rental period. In most examples on the website, the credit appeared to be about 14-18k. This would be equivalent (roughly) to 4x or 5x your initial deposit "investment". If I were to look at this as a bet, I'd want at least 1/3 or 1/4 odds to break even.
(counting "winning", roughly speaking, as the market price not declining much from its current value between now and option expiry)

So... do you like those odds? If you do, then financially it sort of makes sense.

People with in-depth knowledge of Black-Scholes models of option pricing will probably hit me now for being completely naive

bren2002

jaffa20 wrote: »

the properties on their website are priced to reflect the current market.

How can you say that? The first place I looked at - 2 Bed Apartments From €275,000, 3 bed Duplex From €360,000 and 3 bed Townhouses €365,000.

Picking the middle option, that's 10 times the average wage. 10 times.

Banks are moving to 5 times max, which is roughly historically where they've been (3x first and 2 x second salary).

When that 3 Bed duplex halves in price, then it will priced to reflect the current market.

jaffa20

bren2002 wrote: »

How can you say that? The first place I looked at - 2 Bed Apartments From €275,000, 3 bed Duplex From €360,000 and 3 bed Townhouses €365,000.

Picking the middle option, that's 10 times the average wage. 10 times.

Banks are moving to 5 times max, which is roughly historically where they've been (3x first and 2 x second salary).

When that 3 Bed duplex halves in price, then it will priced to reflect the current market.

And here is the same 2 bed apartment on daft.ie for €325,000.

That's a difference of €50,000. I was looking at the 1 bed apartment in Clonee and it is also around 50k more expensive on daft. This also makes them more appealing. Perhaps, i should wait 5 years and save and pay someone elses mortgage in the meantime, but i really don't see these properties halfing in price.

The_Conductor

Apartments in the likes of Clonee or Lucan- certainly have the potential to halve in price over the next few years (on-top of the reductions already in the market). Consider that many have already dropped 35-40%- according to official valuations carried out on behalf of the banks of a number of repossessed properties......... Apartments in particular have very little inherent longterm 'worth' people use them for shortterm purposes- with the intention of moving onwards or trading upwards. Just under 80% of new builds in the greater Dublin area over the past 4.5 years- were apartments. They are empty in their droves- and the trend is for more and more of them to empty in the coming months.......