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Could rent-to-buy be your key to home ownership

This article tells the story of Jared and Nick, first-year apprentices in Australia facing the challenge of entering the property market, who, with the guidance of their teacher and a mortgage broker, explore and successfully navigate a rent-to-buy scheme, ultimately becoming homeowners.

Jared and Nick met at trade school and immediately became best mates. As first-year apprentices earning minimum wages and still living at home, each wondered how they’d ever afford to buy a place of their own.

Australia’s property market is challenging, but for young people just starting out, it can be totally demoralising.

While Jared and Nick would be able to afford rental payments, neither could see themselves scraping a home deposit together.

One day during lunch at trade school, their teacher overheard them lamenting the current housing climate and suggested they consider a scheme known as rent-to-buy. He explained that it’s an arrangement they could undertake in partnership. In fact, his daughter had co-purchased her first home through a rent-to-buy plan with her cousin.

Intrigued, the boys met with a mortgage broker to understand rent-to-buy and how it might work for them.

In a nutshell, rent-to-buy is a rental agreement that offers the option to purchase the property at a later date.

It works like this

  1. Find a property for sale whose owner is open to a rent-to-buy arrangement (there are websites specialising in these properties).
  2. Have the property independently appraised to ensure the price reflects its current market value.
  3. Draft a legal contract outlining:
    1. the duration of the rental agreement.
    2. the property’s purchase price at the end of the rental period.
  • the portion of the monthly rent going towards equity in the property.
  1. upfront and/or ongoing fees.
  2. the legal understanding between co-purchasers.

Jared and Nick thought the scheme could work for them, however their mortgage broker was quick to point out the pros and the cons of a rent-to-buy arrangement.


  • The purchase price is agreed upon upfront so the purchaser can plan ahead.
  • There is no obligation to buy at the end of the rental agreement.
  • Depending on the agreement, property equity will have accrued.
  • Purchasers can live in the property before buying.
  • First home-buyer benefits may apply.


  • Property fluctuations may disadvantage purchasers.
  • The purchasers may be responsible for property repairs and maintenance while renting.
  • Rent will be inflated to cover fees.
  • A mortgage is required at the end of the rental period. Normal approval terms apply.
  • Co-purchasing agreements are complex and legal advice is highly recommended.
  • Rent-to-buy schemes vary between states. Understand the laws prevailing in the location of the property.
  • Fees are non-refundable.

Ultimately, Jared and Nick went ahead with the scheme, renting a small 3-bedroom house close to schools and transport. They envisaged finalising their purchase three years later, once they’d completed their apprenticeships and were earning higher wages.

Looking further down the track, their little house would work well as a future investment property.

The boys had taken all the right steps. They’d spoken to legal and financial professionals, chosen a suitable property, made a plan and stuck to it.

As a result, by 22 years of age, Jared and Nick were homeowners, proving that with advice, a strategy and know-how, you’re never too young to begin planning your financial future.

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