Rent to Own Kenya: Everything You Need to Know
Rent to Own Homes in Kenya: A Flexible Path to Homeownership
If you're like most people, you probably think of rent-to-own homes as a last resort: a way to get into a home when you can't quite afford the down payment or don't have good enough credit to qualify for a mortgage.
But what if we told you that rent-to-own homes could be a great option for many people? That they offer several advantages over traditional home buying? If that sounds interesting to you, keep reading. You will learn all about rent-to-own homes and why they might be right for you.
1. What is Rent to Own?
Rent to own, also known as rent to buy, is a type of contract in which the tenant has an option to purchase the property they are renting at some point in the future. Usually, this option expires after a certain number of years.
💰 Option Fee:
The seller gets a fee, known as the option fee or option money which gives you the option of buying the house once the lease expires. This fee is non-refundable but negotiable, ranging between 2% and 7% of the purchase price.
Two Types of Rent to Own Agreements:
📄 Lease Option
There is an option of buying the house once the lease agreement expires. If you change your mind, you can always move to another house with no obligations to the landlord.
⚖️ Lease Purchase
It is a legally binding contract where you are obligated to buy the house at the end of the lease whether you can afford it or not. It is usually hard to get out of this type of contract.
2. How Does Rent to Own Work?
When you enter into a rent to own agreement, you will pay a fixed amount each month for a certain number of years. This amount will be lower than the market rate rent, but it will still be more expensive than your average monthly rent payment.
📊 Key Numbers:
- Rent is 25% to 30% more compared to the usual rent price of that area
- This increase allows for a portion of the payment to be credited toward the eventual purchase
3. The Process of Rent to Own in Kenya
🏠 Buying Price
The seller states the price of the house either at the start of your lease before you sign the agreement or when the lease expires.
💰 Paying Rent
Your rent will be slightly higher than other tenants because a portion (rent credit) will go toward purchasing the home. Rent is 25-30% more than usual market rates.
🔧 Home Maintenance
Sellers are usually responsible for property maintenance, but some rent-to-own agreements transfer this responsibility to you since you'll eventually own the house.
🏦 Buying the House
When it's time to buy, mortgage financing will help pay off the balance. A mortgage adviser will explain available options and how the application process works.
⚠️ Important: When you sign a lease option contract and the lease expires, there is no obligation to purchase if you change your mind. However, you will lose the option fee and any money paid up to this period.
4. Deciding Whether It's the Right Option for You
✅ Advantages
- More flexibility in deciding when to buy the house
- Easier transition back to renting if circumstances change
- Rent payments may not count as taxable income, offering potential tax savings
❌ Disadvantages
- Rent may increase if interest rates rise before you purchase
- Potential issues with property maintenance and limited say in repairs
- The risk of losing the option fee if you change your mind
5. Rent to Own Houses in Nairobi
If you're looking for rent to own properties in Nairobi, there are plenty of options available. You can find homes that are rent to own through real estate agents or online listings.
How to Find Rent to Own Properties:
- Companies that advertise rent to own homes
- The landlord wants to sell their property
- Approach the landlord and propose the idea
- Companies such as Rama Homes and Superior Homes have these houses readily available
6. The Rent to Own Agreement
All the terms and conditions should be put in writing. This document will serve as a reference for both parties throughout the duration of the agreement.
Key Items to Consider Before Signing:
- The amount of rent that is due each month
- Amount of down payment
- The length of time period for rent payments before becoming eligible to purchase
- The interest rate on the purchase price and when it is payable
- Who pays homeowner's insurance, property taxes, and other related costs
- Any special clauses or conditions that need to be met to become the owner
Conclusion
Before you commit to this type of investment, doing due diligence and researching the landlord/seller puts you in a better space and well-armed with the right information to make an informed decision. Find out how long they've owned the property and if the title deeds are readily available.
All in all, rent to own can be a great option for those who want to buy a home but don't have the funds for a down payment. It offers flexibility and allows you to take your time before making a final decision. However, it's important to weigh the pros and cons carefully before deciding if rent to own is right for you.
📋 Rent to Own Quick Reference
📊 Lease Option vs. Lease Purchase
| Feature | Lease Option | Lease Purchase |
|---|---|---|
| Obligation to Buy | No | Yes (Legally binding) |
| Flexibility | High | Low |
| Risk Level | Lower | Higher |
| Option Fee Refund | Non-refundable | Non-refundable |
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