RENT-TO-OWN SCHEMES

At first glance, RTOs promise a win-win: you rent a place today with the option to buy it tomorrow. It’s like leasing a car, but with the dream of calling it your forever home. So you’re technically investing—not just renting.

But let’s unpack that.

Most RTOs are really two contracts in one. The first is your standard lease agreement. The second is a separate deal—a purchase obligation—like a forced marriage between lease and loan. Now, you’re not just renting. You’re borrowing too.

And that’s the trap: many buyers believe their rent goes entirely—or mostly—toward the property’s price. But in truth, you're paying rent, the cost of the property, plus an added premium. That premium? It’s the cost of money—aka interest. And it’s rarely friendly.

If you're in an RTO because banks won’t lend to you, it’s likely because you're a credit risk. Sellers know that. So they protect themselves with much higher interest rates—often exceeding 10%. As a result, RTOs often end up being more expensive than traditional financing.

One supposed benefit of RTO schemes is that buyers can lock in today's market price and hedge against future price increases. But what if prices aren’t rising—like in a market slowdown (such as the one we’re in now)? And if prices were on an upward trajectory, why would a seller want to lock in today’s price? The very existence of RTO schemes can be a sign of market weakness.That’s worth thinking about.

Buying property should be a deliberate, well-calculated move. And while RTOs may offer a tempting shortcut, they usually come at a steep cost.

Don't get me wrong. RTOs are not inherently bad—they’re just significantly more expensive. It's exactly like buying that iPhone from PowerMac on 24 months installment but at a significantly higher price than its retail price. If you're fully aware of the trade-offs and still choose to proceed, at least you're going in with eyes wide open.

In most cases, though, patience and proper bank financing will serve you far better in the long run—especially cost-wise.