I have been asked many times – how does the financial side of a rent2buy transaction work?
Herewith a simple example – remember each rent2buy or ALA transaction is calculated on it’s own merits.
The parties agree on a purchase price of R1 million for the property.
They agree on a peer to peer transaction and the proposal is as follows:
The current market related rental is R 7500.00 per month.
If the landlord is to continue with an ordinary rental – he would collect R7 500.00 per month, less rates taxes etc that he usually pays (less R 1 200.00) = R 7 500 – R 1 200 = R 6 300.00
The Rent2buy purchase would offer the landlord/seller the following:
The rent2buy buyer applies for a home loan after 12 – 24 – 36 months.
KEEPING TRACK WITH INFLATION
Each year the purchase price increases with inflation – percentage agreed upfront – say 8 %
INSTALMENT SALE – Alienation of land Act
The parties agree on a purchase price of R1 mil.
Interest to be paid at 10 %
Capital and interest paid back over a 5 year period (Note – the purchaser can accelerate the payments and apply for a home loan during the term of the agreement and take transfer, register a bond and settle the full purchase price in cash.
Due to that fact that the purchase price is “crammed” into a 5 year repayment period – the monthly instalment is very high – this can be negotiated between the parties and reduced if a large deposit is put down.
Contact me for a full calculator.
Meyer de Waal
021- 461 0065