Rent-to-buy start-up courting regions
A newly launched rent-to-buy platform is reporting interest from budding homebuyers in regional areas following its first expressions of interest round.
Startup OwnHome aims to eschew the traditional deposit-saving phase by purchasing a property on behalf of an individual and then renting it back to them for a set period while they accrue ‘equity points’ of 2.5 per cent of the purchase price each year.
Renters then have the option to purchase the property at a pre-agreed strike price, calculated as the purchase price plus 3.8 per cent per annum for each year of the agreement.
This theoretically allows them, in a rising market, to capitalise on any additional capital gains realised during the rental period.
“Customers realise all of the growth rate,” co-founder Tim Harley said, pointing to recent price growth rates in cities.
“Monthly payments are calculated at 7.05 per cent of the original purchase price, on a per annum basis.
“Monthly payments are roughly equivalent to what someone saving for a similar property might pay by renting and saving money each month, although the company acknowledges they could be more expensive in some situations.”
The company recently began taking expressions of interest from prospective homebuyers.
Co-founder James Bowe said that within 10 days of expressions opening, 130 applications had been received.
“While applicants had disproportionately been in Sydney, there had been applicants seeking housing in regional areas.
“I think there has been a fundamental shift coming out of COVID-19 that has put a premium on space a place of work, school and their living space, work dynamics have shifted and what was previously too long of a commute has changed,” Mr Bowe said.
Finder Home Loans editor Sarah Megginson said that products like OwnHome could work for certain buyers, but that prospective customers should make an individual assessment based on their financial situation.
“They suit a certain person, or a certain market, but the really important thing to understand is that you’re going to pay a premium for the service,” Ms Megginson said.
“The product is a form of forced savings and allowed buyers to pay a premium in order to get a foot on the property ladder now instead of waiting.”
Ms Megginson advised buyers interested in platforms like OwnHome to consider their exit options should they experience a change in circumstances and to “read the fine print.”
Mr Harley said that OwnHome customers who no longer wished to live in their property could choose to exercise the option, get a mortgage and then rent the property out, or sell their “value-accrued” option on to another customer.