With soaring property values in Sydney and Melbourne, an arrangement known as ‘rent to buy’ has recently been given more and more attention.

‘Rent to buy’ is an agreement between a tenant and landlord, where the landlord agrees to sell the property to the tenant at X price in Y years’ time. In return, the tenant agrees to pay extra rent each week, which is then taken off the total purchase price when it comes time to buy.

Whilst this can seem like a great option, this arrangement can be perilous to both the buyer and the seller as is usually the case where there are ‘bells and whistles’ wrapped around a property strategy. Beware of complexity or investing in anything that is not simple to understand!

Our partner in property education, Peter ‘the Property Professor’ Koulizos, illustrates the benefits and pitfalls.