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Trying before Buying

What is Trying before Buying?

This concept, also called “Rent to Buy” or “Rent to Own”,  is getting more and more common in Spain. Why? because there are many financial and practical benefits for both buyer and seller. We´ll make it easy and transparent for you even if you have never heard of this concept.

Ok, we start with the seller. Why would  a seller choose this concept?

As we all know selling a property could be a very lengthy process which might take several months or even years, if the seller wants to receive the right price. As long as the property is on the market, the owner still has to continue paying all kind of taxes and maintenance. With this concept the property will generate income for overhead and extra costs. It can even generate added income. In other words this concept gives you more flexibility with your future real estate  plans.

Why would a buyer choose this concept?

The trick with this concept for the buyer is that you do not need to give up on your dream of buying a property in Spain, even if you do not have sufficient economic requirements for the initial down payment yet. Also you can experience the property and area before making a final decision. Moreover, if the rental agreement is done through your company it may even be tax deductible. Our legal advisors are available to lead you through this process. Often you will be able to save money for the later purchase and at the same time you can document to your bank that you can make the monthly payments which makes it easier to be approved for a mortgage.Should you decide not to go ahead with the purchase, the conditions for terminating the contract depends on the initial agreement.You don’t even have to pay the community costs for the property while you are renting.These are also paid by the owner.

As mentioned before the contracts are individual but normally it is specified that a certain percentage (e.g. 65-100%)  of the amount of rent that is paid, will be deducted from the total sale value. Wow! Isn’t it amazing? You do not lose all your money on rent! This is a very important advantage for the buyer. If the buyer pays more than the actual rent, that money will also be deducted from the final purchase.

The length of the rent is decided in each agreement. It is often set at two to five years, though the purchase may be brought forward before this.

Let’s make it more clear by some cases:

Mr. Smith wants to sell his villa with the price of €500.000

Mrs. Jones falls in love with this property but she does not possess the required down payment yet, so she decides to take advantage of the Trying before Buying-concept.

The contract is based on 2 years rental. The monthly rent is set to €1500,- of which 75% (€1125) will be deducted from the final amount of sale . In this period all costs regarding the property will continue to be paid by the owner. After 2 years Mrs. Jones still wants to proceed with the purchase, so she is going to pay:

Total sale price:                                                                                           €   500.000

Initial deposit ((100% deductible):                                   € 10.000

6 months paid in advance (6x1500x100% deductible):  € 9.000

Last 18 months: € 1500 x 18 (65% deductible):              € 17.550

Total to be deducted:                                                                                       € 36.550


Final payment for the property:                                                   € 463.450


Another example with the same property:

Total sale price:                                                                                           €   500.000

Initial deposit ((100% deductible):                                         € 10.000

12 months paid in advance (12x1500x100% deductible):  € 18.000

Last 12 months: € 1500 x 12 (65% deductible):                    € 11.700

Total to be deducted:                                                                                       € 39.700


Final payment for the property:                                                   € 460.300


 


 

The above are only two examples of the construction of such an agreement. The final conditions are negotiated between the buyer and the seller for each individual contract.

Hello Sun will be assisting both seller and buyer through the entire process of reaching a mutually beneficial contract.

The fee for Hello Sun is also individually negotiated depending on the contract.

Please do not hesitate to contact Hello Sun for any inquiries you may have!

 

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