Advantages of Rent-to-Own Property in Dubai

  • June 16, 2018

Talks of reviving Dubai property market through rent to own schemes were abuzz last week. In a well-developed construction industry such as Dubai, real estate projects are manufactured on a consistent basis and over supply of properties such as apartment units, villas and townhouses had become a concern for sales offices of property developers. Yet, here is some good news for prospective home buyers. The promise of uplifting the real estate market with the advent of Expo 2020 is coming closer to reality. Neighborhoods such as Dubai Sports City, Jumeirah Village Circle (JVC) and Dubai South’s The Villages have already come up with flexible options such as rent to own schemes that assures home buyers of realizing their dreams to own a property in Dubai. Rent to own properties are actually beneficial to both, the buyer and the seller of a home.


Rent to own essentially is when a homeowner consents to sell a property to their tenant for an agreed price within a time period. A part of the rent amount will go toward either the purchase price or buyer's closing costs associated with the purchase in the form of a rent credit.

Renting to own a home is similar to a car lease. The seller gives his tenant the right to purchase the home in the future, usually one to three years out, for a price that is agreed upon today. Generally, the tenant will pay a fee, called option money, which will keep open the option of buying.

Renting to own can be an easy, low-stress, inexpensive way to buy, sell or invest in real estate. Rent-to-own purchases typically work like this: The lease of a home is combined with an option to purchase the property within a specified period of time (usually 3 years or less) at a particular price. The renter pays a non-refundable “option fee” (like a security deposit) which is sometimes 1% to 5% of the price, which goes toward the purchase price of the home. Usually the renter pays the monthly rent payment plus an additional premium that is also credited to the purchase price.

There is also an alternative way to buy a home: a rent-to-own agreement, also called a lease option or a lease-to-own agreement. When buyers sign this kind of contract, they agree to rent the home for a set amount of time before exercising an option to purchase the property when or before the lease expires.

The Dubai Land Department (DLD) has exemplified high efficiency with its process for rent to own properties. For those who are interested, all related documents are available on its website.

The benefits to the seller of rent to own option

Usually, the seller has better odds of getting the full asking price and a higher monthly rent payment for a rent-to-own property. That is because the seller is adding value by providing buyers with financing alternative that will help them become a homeowner.

The amount of the non-refundable option deposit is up to the seller. So, sellers can either profit at closing when the home is finally sold, or if the renter backs out of the agreement, you’ve still been collecting rent and you may keep the option deposit. The potential for significant earnings can be great in this respect. All this has to be pre-agreed on a document though.

  • Above market-average rent: Since a buyer is having a financing option that is different from regular mortgage, the cost and risk to acquire a home is relatively lower. The seller may hence charge a higher rent for the benefit that a buyer avails.
  • Cash in hand is more: The sellers have adequate cash flow to add to their savings and additional investments.
  • Higher sale price in a slow market: Renters who need slow-going financing will be open to pay a premium due to convenient financing terms.
  • Low Risk: The non-refundable option deposit is kept by the seller should the renter default or decide not to buy.
  • Better tenants: When you are renting to someone who has a long-term interest in your home, odds are they will take better care of it.
  • Broader target market: Sellers can target both renters and buyers in this scheme.

The benefits to the buyer of renting to own option

The benefits of home ownership are aplenty. If one has no means to make down payment on a home in their current situation and want the rent amount to become an investment, renting to own is the best option. One of the biggest benefits is the rate at which one accumulates equity and gets more square foot area than for how much one may qualify for in a bank mortgage.

  • Equity growth: The buyer’s rent payments will actually go toward equity in a home. Every month a portion of the rent payment is credited towards down payment or a portion of the sales price.
  • Any amount by renter goes towards home acquisition: The buyer/renter pays the seller an option deposit which will be fully credited when you buy the home.
  • Investment expenditures are lower: When you buy a home, you need a down payment that is at least 3.5% of the purchase price of the home as well as closing costs. Here, you’ll only pay a normal rental security deposit typically plus the option deposit.
  • Payment flexibility: Restrictions are up to the seller which means there could be more flexibility with credit, etc. You prove your ability to purchase the home by making rent payments every month.
  • Lower risks: The buyer has full control of the home while paying rent. Living in the home as a tenant, one can learn all possible advantages and disadvantages before the actual ownership. So the buyer has time to prepare and learn about the total cost of the home while there before they have to take on full responsibility as a home owner.
  • Maintenance costs: Home maintenance problems that exceed a certain amount of money are delegated to the seller.