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Condo developers offer rent-to-own

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Guest | 11 Apr 2013, 12:12 PM Agree 0

The Toronto’s Cinema Towers is the latest development hawking that alternative, allowing homebuyers/renters to sign purchase agreements for units of their choosing.  When they move into those downtown condos, still under construction, a portion of their monthly rent, “along with the total amount accumulated through” the developer’s deposit payment plan “will be credited toward (a) 5 per cent down payment.”
After one year, it falls to the tenant to come up with the remainder of any funds needed to make up that down payment.
The offer is largely seen as a way for developers to shift new units even as first-time buyers find themselves shut out of the market by more stringent mortgage rules, introduced last summer. It also helps developers compensate for what some analysts are calling a “shrink-back” in investor demand.
Still, condo investors with units of their own to lease will increasingly have to contend with this kind of direct competition from builders, say analysts. If that rent-to-own strategy catches on, it could slacken demand for rental units even in the GTA, helping stabilize rents, says consumer advocates.
But investors remain the great uncertainty, say economists, trying to gauge their long-term commitment to the market and what if effect any pull-out might have on property values.
  • Anastasia Boyd | 16 Apr 2013, 05:59 PM Agree 0
    Don't forget that ONLY the portion of the rent OVER market value rental may be applied to the down payment... that is CMHC rules and with 5% down you will have CMHC... DON'T get suckered by that old stunt kids!
  • Chantal Cleroux | 16 Apr 2013, 06:38 PM Agree 0
    I consider RTO an excellent strategy even with CMHC insurance. It's all about how it is setup. What I don't like is forcing a buy out in only one year. That should be flexible based on the buyer/renter's financials.
  • Eduard Novak | 16 Apr 2013, 08:36 PM Agree 0
    Hahaha! Nonsense! This is nothign more than a marketing ploy by those developers who are trying to move units that no one wants. At the same time, anyone with half a brain who looks at this offering will understand that (a) the monthly payment will be substantially higher than any regular rent for the same type of property available for rent only; and (b) the funds accumulated over one year will not be sufficient to to make a dent even in the 5% requirement (especially in the super expensive Cinema Towers). Investors have absolutely nothing to fear in respect to these programs. And whatever consumer advocate that had been quoted is completely wrong. Rents will not stabilize as long as the property values, property taxes, utilities and maintenace fees keep climbing as they do. The market dictates rents and no silly marketing schemes by one or two developers will ever make a difference.

    As far as condo investors are concerned, buying condos in the right neighbourhoods, in the right buildings with proper layouts, and at the right price is what will determine their success. Hiring a professional, knowledgeable realtor should help them in this aspect.
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