Yeah, we all know that property prices in Barcelona are crazy. It is impossible to think about purchasing an apartment without a mortgage unless you have a very generous inheritance. There is one way to try to buy an apartment with having kind of “trial period” first. And then you will have a few years to save, earn, whatever you will do to have the full price in case you hate mortgage and don’t want to have debts for 20-30 years to banks. This option is called “alquiler con opción a compra”. Let me explain you the process, pros and cons and how can you agree on it with the property owner so it is a “win-win” situation.

Key Components of a Rent-to-Own Agreement:

  1. Dual Contract Structure: This agreement encompasses two subcontracts: one detailing the rental terms and another outlining the conditions for the potential purchase. The rental contract adheres to Spain’s Ley de Arrendamientos Urbanos (LAU), while the purchase option is governed by the Código Civil.

  2. Option Fee (Prima): Tenants typically pay an upfront fee, often around 10% of the property’s agreed purchase price, to secure the future purchase option. This amount may be forfeited if the tenant decides not to proceed with the purchase.

  3. Rental Payments: Monthly rent is paid throughout the lease term. Depending on the agreement, a portion of these payments may be credited toward the property’s purchase price. Commonly, 100% of the rent is deducted during the initial years, with a reduced percentage in subsequent years.

  4. Purchase Price and Term: The property’s purchase price and the duration within which the tenant can exercise the purchase option are predetermined and specified in the contract. This provides clarity and security for both parties.

Advantages:

For Tenants:

  • Equity Building: A portion of rent payments may contribute toward the property’s purchase, effectively building equity over time.
  • Trial Period: Tenants can experience living in the property and assess the neighborhood before committing to a purchase.
  • Price Lock-In: The purchase price is fixed at the contract’s inception, offering protection against potential market price increases.

    • For Property Owners:

  • Steady Income: Owners receive regular rental income during the lease period. Well, even though I’m pretty sure the owners are aware about high demand for rentals in Bcn and won’t be left without regular income.
  • Potential Sale: There’s a higher likelihood of selling the property, often at a predetermined price.
  • Tenant Commitment: Tenants may be more motivated to maintain the property, given their potential future ownership.

    • alquiler_con_opcion_a_compra

    Disadvantages for tenants:

  • Option Fee (Prima) may be forfeited if the tenant decides not to proceed with the purchase.

    • Considerations:

  • Legal Clarity: It’s crucial to draft clear contracts outlining all terms, including the option fee, rent credits, purchase price, and responsibilities for property maintenance and expenses.
  • Financial Preparedness: Tenants should ensure they can secure financing to complete the purchase when the option period concludes.
  • Market Evaluation: Both parties should assess current market conditions to set a fair purchase price and rental rate.

    • In Spain, rent-to-own agreements offer a flexible pathway to homeownership, especially for individuals who may need time to arrange financing or wish to familiarize themselves with a property before making a full commitment. However, it’s essential for both tenants and property owners to seek legal advice to ensure the agreement is structured favorably and complies with all relevant regulations which means you will need money for consultancy before start these processes. Oh well, better pay for the info before rather than lose money without any outcome at the end.

    Professional’s opinion:

    I asked a Real estate agent if all of this stuff is true and if owners really sell their properties offering the Rent-to-Own Agreement. Ivan Belovolov, a Real estate agent in El Vendrell from Iad Spain and moreover, he bought his house through this option. He says “It is a pretty interesting way to purchase a property, but the way how it sounds doesn’t match reality. In order to use it, you have to have some savings, because you should consider that besides an upfront fee (Prima) at the beginning, there will be big payments every year within the contract duration.”

    Ivan Belovolov

    “I know it might be difficult to understand without a clear example with real numbers. Let’s take one real example. There is a house that costs 149.500€. There is a signed contract of this type for 3 years and the owner with the buyer agreed on the Prima payment, which will be 67.250€. Then you can see the rest amount of the price and you can calculate and agree on the amount per each year. So, the buyer and the owner agreed on each payment in advance and what do we have?

  • Prima (an upfront fee): 67.250€.
  • The rest of the price that will be needed after paying the Prima: 82.250€.
  • Rent payment per each year already summed up: 7.200€.

    • Knowing this, the owner and interested party can agree on those big payments that will be needed each year besides the Prima. In this case big payments that the buyer will be paying are: between 14.950-16.000€.

    So, by the moment of paying an upfront payment the buyer can see how much will be needed. In this case the future owner can calculate either he/she will have these amounts of money to pay or if it’s better to take a mortgage for the rest of the price. Because it is easier to get an approved mortgage from the bank for 82.250€ when you already have a big part paid rather than ask for the full price (149.500€)”

    “Basically, this option is a good fit for those buyers who know that they want a certain property and plan to take a mortgage in a few years. So, in this case they can pay a part of the price and get a mortgage for the rest of the price amount. Think about it, it is much better to ask for a lesser amount rather than it would be for the full price, as I already said.

    Let’s imagine you have savings, just started working at a new good job and you sign this type of contract. You pay an upfront fee, calculate the rest of the price, maybe after a few years of paying rent price and yearly big payments you take a mortgage at the bank. And once you get a mortgage, you can consider that you paid for a property and just continue paying to a bank”.

    “One of the biggest cons of this contract for property owners is that it’s still a rent contract which means there is a risk of “okupas”. Even though the potential buyer will sign a contract and will pay a Prima payment, the buyer can just stop paying rent and will become “okupas”. We know that there is a big problem with “okupas” in Catalunya and it is a very long and painful process to sue and win a lawsuit against “okupas”. Thankfully now many insurance companies offer a special insurance for these case which is called “Seguro Anti Okupas/ Seguro de Impago”. It usually includes the costs of eviction, costs of legal defence in relation to the occupation. It may even cover damage to the building due to acts of vandalism. It might be understandable that many owners are afraid to deal with rent and if they are thinking of selling their property, they just want to sell it as soon as possible without any risk”.

    Ivan:¨That’s why it might be difficult to find a really good property in a good area where owners will accept the “alquiler opción a compra”, but still there are. You just need to search for them very well. Some of my colleagues have a few options and offer them to their clients¨

    Thank you, Ivan, for your comment on this topic and for all the examples. 🙂