Being unsure about whether to rent or buy is fairly common. While it’s true that buying a house in Italy requires a hefty economic commitment at first, spending your entire life paying the rent on a property that will never be yours is not always appealing. So what do you do? Is it better to rent or buy in Italy?
This article, prepared for idealista/news by the website ComparaJá.pt, analyses another solution: a leasing option, known variously as 'let to buy', ‘rent to buy’ or ‘rent-to-own’. Read on to find out more about this intriguing alternative when assessing your property options in Italy.
What is rent-to-own and how does it work in Italy?
A leasing option is a way of buying a home where you rent it for some time prior to the purchase, and where all of this is stipulated in the initial contract. With rent-to-own, you rent the property as normal (usually a period of 2 to 5 years is normal in Italy, depending on the lease agreement) and then you have the option to buy it.
What are the advantages of it?
It provides flexibility because you can live in a place before buying, giving you longer to save money. This is an excellent alternative for people who haven’t got enough money to buy an Italian property yet but wish to do so in the future.
Another advantage it has is that it is not mandatory for the tenants to buy the house after the rental period is up. The seller is the only one who has a commitment as they are required to sell their house to the tenant within the agreed amount of time as long as the tenant still wants.
There is no obligation to buy if you decide that it’s not a good deal for you after renting for a few years - you get to try before you buy! Conversely, if you wish to bring the acquisition forward before the rental period has ended, you may do so provided both parties agree.
The homeowner can also benefit from rent-to-own options because it can make it more likely that they will sell the property eventually and even if they don't sell it in the end, they will still have made some profit from the rental.
The procedures of the lease agreement, such as term lengths and the cost of the property, are set at the discretion of the tenant and the owner when they sign the contract for the leasing option. Often, the term of the lease is determined at two to five years with the possibility to bring forward the acquisition before the end of this period. Everything else in the let to buy contract is the same as in a normal rental contract, so you won't even have to pay the community costs for the building while you are renting, for instance - these are paid by the landlord.
There is one final awesome benefit to be aware of: if both parties agree to it in the contract, the value of the rent paid over the years counts towards the total value of the sale. In this way, tenants are not throwing away their money on rent; rather, they are investing it in the possible future purchase of the property they are renting. Even better, the final sales price often carries a heavy discount on the standard Italian market rate anyway in order to incentivise potential tenants/buyers.
What about the disadvantages?
Naturally, there are some disadvantages to leasing options. Firstly, the demand for this type of option in the Italian housing market is limited due to the fact that the rental market has been growing recently, whereas sales have taken second place.
If you do sign a rent-to-own contract, though, the rent may be subject to periodic revision, just as with any let. There could even be an extra 'option fee' that you have to pay as well as the deposit which serves as an additional guarantee for the owner to know the tenant is serious about the purchase.
Be careful, too, about the final sale price agreed at the beginning of the rent-to-own period. While the price may be below the market average at the time you sign the lease, it may be higher than the market average within five years' time, depending on inflation and the evolution of house prices
The seller, too, runs the risk of wanting to sell the property but that the tenant decides not to buy it. However, homeowners only usually agree to rent-to-buy options when they want to sell the home but don’t need to do so quickly and so they use the rental as a transition period until the sale.
In conclusion, you should consider whether the possibility of a let to buy leasing option is worth it for you, as it might just be the ideal way for you to afford to buy a house or villa in Italy within the next 5 years with all the added bonus option of trying before you buy.
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