The "Rent to Buy" is a "preparatory program to the purchase", a method of sale of real estate which is present since many years in some common law countries such as USA, Australia, UK and Canada, and which is successfully spreading in Italy, in order to overcome the ongoing credit crisis and the difficulty of obtaining immediate liquidity.
It is a solution that allows to enter directly into the chosen habitation, firstly for rent and then buying the property at the end of the purchase process, to be completed within three years (maximum time to protect the buyer due to the effect of transcription) to a fixed price agreed from the very first day. This is not a rent with purchase option, but a negotiating device created on purpose for the needs of nowadays.
This special mode of sale, if it's well structured by a skilled professional, allows the fruition of several benefits by using some "financial leverage" , such as:
- The possibility for the buyer to create a "credit history", designed to improve his rating to obtain the mortgage more easily and at the best market conditions (not only in terms of bid-offer spread, but also in terms of ancillary expenses);
- The creation of a "first leverage effect" in which the buyer, paying the seller (business or private) a monthly amount equal to a normal rent, puts aside a part of this as a down payment, so that he can raise his initial deposit without overloading his family budget.
- The creation of a "second leverage effect " as a result of the postponement of all expenses and taxes related to the mortgage and the notary's deed;
- A "trial period" during which, if the requirements change, there is the chance to sell the property to a third subject through the simple transfer of the contract in order to avoid the costs of the notary's deed and possibly make a little profit.
Another advantage is related to tax benefits of the so-called "main residence”, since if you don't purchase the property from the very beginning you can have the time to sell and take advantage of tax benefits in the next purchase.
Therefore, this "Win -Win" mechanism is efficient both for those who buy and those who sell, but it must be adapted to the specific case. In other words, it must be built and "tailored " according to the needs of the parties involved.
For the use of the "Rent to Buy" and for the guarantees that must necessarily attend the purchase program, it is essential the assistance of a trained professional as the Notary to assist the client and the construction company, from the first negotiation to the stipulation of the final contract in a professional and puntual way, quickly transcribing the contract in order to ensure the effects of reservation for the next three years.
The mechanism of transcription, along with the advanced contracts, protects the buyer, even in the extreme case of bankruptcy of the company or, if the seller is a private, in the event that the asset is subject to a judicial mortgage or a property attachment.
Our office deals with this negotiating device since several years and we are therefore perfectly able to guarantee to all the parties the success of the operation.