Allbricks versus Rent to Own

Allbricks versus Rent-to-Own. We understand how the two could be an easily confused comparison, but the reality is that Allbricks couldn’t be further from ‘Rent to Own’. To demonstrate the differences, and in particular, the approach that Allbricks takes to helping home buyers, we’ve laid out a comparison.

Rent to Own

Allbricks

Description

Rent to Own

You rent a home for a certain amount of time, with the option to buy it before the lease expires. Rent-to-own agreements consist of two parts: a standard lease agreement and an option to buy.

Allbricks

When you buy an Allbricks home, you buy a percentage of a home. The rest is bought by investors. You have a contract that ensures as long as you pay your monthly rent, it’s your home.

Purchase price

Rent to Own

Rent-to-own agreements should specify when and how the home’s purchase price is determined. You and the seller agree on a purchase price when the agreement is signed. This will often be at a higher price than the current market value. In other situations, the price is to be determined when the lease expires, based on the property's then-current market value.

Allbricks

Current market value that the seller agrees to sell for so long as it is within an acceptable range of the RICS valuation.

Fees

Rent to Own

You (as the buyer) pay the seller a one-time, usually non-refundable, upfront fee called the option fee, option money, or option consideration. This fee is what gives you the option to buy the house by a given date in the future. The option fee is often negotiable, as there’s no standard rate. Still, the fee typically ranges between 1% and 5% of the purchase price.

Allbricks

You only pay fees to Allbricks on equity you purchase as follows:
- 5% + VAT on the value of the equity purchased on the initial purchase of the home.
- 2% + VAT when you buy directly from investors.

Can you own equity in your home on day 1 of occupation?

Rent to Own

No. You can only buy equity in your home when the lease expires in the future at which point you will be required to purchase 100% of your home either by using your own financial resources or by taking out a mortgage. If you cannot purchase your home, you will need to move out. Any money paid up to that point such as the option fee or rent credit earned is likely to be forfeited.

Allbricks

Yes. You must buy a minimum of £10,000 or 1% of the value of your home. The part of the home that you do not own is purchased by investors.

Can you buy equity during the tenancy period?

Rent to Own

No see above.

Allbricks

Yes. There are 2 ways in which to buy further equity in your home:
- If investors want to sell some or all of their investment you get first right of refusal.
- From three years after you move in, you get the right to buy 5% of what you don’t yet own every year. Anything you may have been offered within the 12 months counts towards that 5%.

What level of rent does the home buyer / tenant pay?

Rent to Own

You’ll pay rent throughout the lease term. Often a portion of each rent payment is applied to the eventual purchase price. As an example, if you pay £1,200 in rent each month for three years, and 25% of that is credited toward the purchase, you’ll earn a £10,800 rent credit (£1,200 x 0.25 = £300; £300 x 36 months = £10,800). Typically, the rent is slightly higher than the going rate for the area to make up for the rent credit you receive. If you cannot purchase the home on lease expiration, then the rent credit you have built up could be lost.

Allbricks

You pay market rent on the part of the property you don’t own.

Repairs and maintenance

Rent to Own

To be negotiated with the landlord. Depending on the contract, you may be responsible for repairs and maintenance.

Allbricks

12% of the gross rent each month will be deducted before payment to investors and used to build up a repair and maintenance fund. In this way, the cost of repairs and maintenance is shared proportionally, according to the size of the parties' investment in the home..

This is a typical scenario, though each homebuyer’s situation is unique and the process may differ according to circumstance. Any figures quoted are simply for the purposes of demonstration. Though the process outlined is also typical, this may differ slightly according to circumstance.