How does rent-to-buy work in South Africa?

    Investing in a property you own is on everyone’s bucket list. Whether you want to move into a starter home or your dream mansion, having the option to rent to buy is an excellent way to build credit and prepare you for officially joining the homeowners club.

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    Why is renting to buy important?

    With many people entering the market for the first time as potential buyers, the option of rent-to-buy is a flexible alternative. If you’ve recently decided to purchase your first home, chances are you have rented properties and figured out what you want from your first property purchase. 

    Renting to buy in South Africa is a great way to build up your credit score, save for a deposit and have peace of mind when it comes to securing a property. It’s essential to have your finances in order when considering applying for a home loan and undertaking the responsibility of maintenance and added costs. 

    A smooth transition from tenant to owner

    Legally, the rent-to-buy option is a fairly simple one to navigate. A lease agreement with a purchase clause inclusion ensures you the right to buy the property once your lease is up. A lease option, however, gives you the freedom to end the agreement and seek a home elsewhere. So what are the advantages of a lease purchase and why should you consider it?


    • The listing price of the property is fixed at the beginning of the lease agreement. This means that the owner cannot inflate the agreed-upon figure for any reason. 
    • You are allowed to rent while improving your credit score with financial institutions.
    • You can organise your legal documents, fees and deposit for the home while living comfortably. 
    • You don’t have to worry about moving costs and you can save for possible renovations or home improvements you want to include once you own the property. 
    •  It's the perfect way to strengthen your home loan application if you’re a young homeowner. 

    Unsteady market

    While the property market forecasts trends and developments throughout the year, it’s important to note the uncertainty with which the South African economy operates. In the event that property prices decrease, you will be paying above market value for a home. While this is sure to leave a sour taste in your mouth, you can avoid this by doing your homework on the best legal options available.

    What you should consider before signing a lease-purchase agreement

    Unless you get a watertight contract overseen by expert property practitioners and legal advisors, you should read the fine print of your agreement carefully. Consider the possibility of changing your mind in terms of the neighbourhood you want to live in or finding a more suitable property. What if you change jobs and need to relocate? It’s essential to include clauses that contain loopholes to release you from binding agreements in case of emergency. 

    If you’re the current homeowner considering selling to your tenant, evaluate your pros and cons, carefully taking into account property insurance, tax necessities and legal liabilities. The transition should be as seamless as it needs to be to benefit both parties.

    property practitioner running a house tour

    Seeff’s dedicated property practitioners are well versed in the rent-to-buy category of homeownership. Contact one of our helpful team members to discuss your home-buying options today.

    Author: Seeff Property Group
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