How Rent-to-Own Homes Work in Australia

Q: Where is rent-to-own available in Australia?

Rent-to-own is available in the following areas of Australia: Greater metropolitan Sydney, Wollongong, Newcastle/Central Coast, Tweed, Greater Brisbane, Gold Coast, Townsville, Canberra, Select areas of Western Australia.

What you need to know about rent-to-own

Rent-to-own or rent-to-buy is an alternative pathway to homeownership with no deposit. It allows you to rent a home but with the option to purchase the property at a predetermined price at the end of the rental period (delaying the need for a mortgage).

Rent-to-own schemes are a relatively new model in Australia and are only available in select east coast areas via specialist providers. Victoria has banned certain rent-to-buy contracts and vendor finance schemes. In South Australia, only the South Australian Housing Authority (SAHA) is legally permitted to offer rent-to-buy options.

How does rent-to-own work?

Here’s how rent-to-own schemes work in practical terms:

1. Rental agreement

You sign an agreement with the property owner or rent-to-own provider that allows you to rent the property with the option to buy it at the end of the agreed rental period. The amount you’d need to pay to buy the property is set at the start of the agreement, according to OwnHome. There’s no credit score impact. You move into the property and make regular rent payments, just like in a standard rental agreement. A portion of those rent payments (up to 40%) go towards the purchase of the home.

2. Option to buy

There's a specified period (usually between 1-5 years) at the end of which you can buy the property. This is called the ‘option period.’ You can buy the property at the end of the option period by taking out a home loan with a standard bank or lender. The equity in the property you have built up through the rental contributions essentially serves as your home loan deposit. If you don’t buy the property, you forfeit all contributions and equity.

Rent-to-own schemes are available through specialist providers in Australia. However, individual property owners or landlords can negotiate a rent-to-own arrangement with a tenant at their discretion. Either way, getting independent legal advice from a solicitor or conveyancer is advised.

Who’s eligible for rent-to-own?

The eligibility for rent-to-own is similar to a rental application and includes:

Tenant/buyer must be over 18 years of age

Must have sufficient verifiable income to cover rental payments

Evidence of income (e.g. payslips, bank statements)

A good credit score — typically above 660

Valid government-issued identification documents (ID)

Australian citizenship or permanent residency (or married or in a de facto relationship with an Australian citizen or permanent resident) at the time of purchase

The rent-to-own costs vary depending on the model, provider, property, and contract terms. Here's a standard cost modelling to buy a $600,000 property via the rent-to-own platform PublicSquare to give you ballpark figures.

Property price

$600,000

Weekly rent to landlord (60%)

$626

Set up fee (2.5% of property value or $15,000)

This is a fee you pay to the rent-to-own company at the start of the agreement. It contributes towards your equity in the home, but you won’t get it back if you decide not to buy the property

Buyer’s agent fee (to acquire the property you choose)

$6,000 — you may not pay a buyer's agent fee if you choose a property within the provider's existing portfolio

Weekly contribution towards purchase (40%)

$417

Property price after 5 years (based on a fixed appreciation of 3.3% per year)

$756,863

Accrued deposit/equity

$188,789 (24.94% of purchase price)

Pros & cons of rent-to-own

Pros

Lower-cost entry to homeownership (i.e. compared to the standard 20% home loan deposit usually required).

You can live in and experience the property before you commit to buying it.

You can build your credit before you apply for a home loan.

You may be able to claim a portion of rental expenses or maintenance costs as tax deductions.

If the property's value increases during the option period, you could potentially purchase the property at a lower pre-agreed price.

There’s no obligation to buy after the option period ends under most rent-to-own agreements.

Cons

Rents are higher to cover contributions towards the purchase.

You lose both the property and the equity paid if you can’t secure finance or don’t use your option to buy.

You still have to use a home loan to buy the property at the end of the rental contract.

The tenant is responsible for maintenance and repair costs which is not the case if you’re renting a property the conventional way.

If the property's value decreases during the option period, and you've committed to

Limited property choices.

Rent-to-own schemes can be a suitable pathway to homeownership for:

First-home buyers who don’t have a large enough deposit to secure a home loan.

People who need to improve their creditworthiness to qualify for a mortgage at a later stage.

Buyers in high-demand areas who want to buy a property without competing offers.

Self-employed individuals who may need to demonstrate their income over a sustained period before they can qualify for a home loan but want to build equity in a property in the meantime

Foreign nationals or expatriates who plan to buy in an area but await permanent residency or permission to buy in Australia.

	Deposit
Rent-to-own	Lower initial costs (1-3% of property value)
Home loan	Requires a larger deposit (up to 20% of property value)
	Ownership
Rent-to-own	You start as a renter with the option to buy later
Home loan	Immediate ownership upon purchase
	Building equity
Rent-to-own	A portion of rental payments go towards equity
Home loan	You build equity from the start as your loan balance reduces
	Repayments
Rent-to-own	Rental payments are fixed each week or month
Home loan	You can structure your home loan repayments to suit your financial situation & refinance when needed
	Flexibility
Rent-to-own	You have limited flexibility to make changes to the property during the rental period
Home loan	You can rent out or make changes to the property at any time
	Purchase price
Rent-to-own	Agreed-upon price based on estimated future value
Home loan	Purchase price is dictated by current market value and supply and demand

	Rent-to-own	Home loan
Deposit	Lower initial costs (1-3% of property value)	Requires a larger deposit (up to 20% of property value)
Ownership	You start as a renter with the option to buy later	Immediate ownership upon purchase
Building equity	A portion of rental payments go towards equity	You build equity from the start as your loan balance reduces
Repayments	Rental payments are fixed each week or month	You can structure your home loan repayments to suit your financial situation & refinance when needed
Flexibility	You have limited flexibility to make changes to the property during the rental period	You can rent out or make changes to the property at any time
Purchase price	Agreed-upon price based on estimated future value	Purchase price is dictated by current market value and supply and demand

Is rent-to-own worth it?

Rent-to-own schemes provide an alternative pathway to the property market without the 20% deposit (i.e. 80% loan-to-value ratio) usually required to get a home loan. But you’ll pay inflated rents throughout the contract, which can be up to five years.

Alternatively, you could save this amount yourself over that time and tuck it away in a high-interest account to build a deposit towards your dream home. You’d continue to build equity in the property once you buy the home and gradually reduce your loan balance.

It’s important to remember that with a rent-to-own home you won't own any part of the property until you secure a mortgage at the end of the option period and buy it outright. If you can’t secure finance for the property, you could lose both the property and any payments you’ve contributed. In some cases, you can request a sale of the property in the open market and potentially receive a refund for all contributions to date.

Mansour Soltani, Money.com.au's Home Loans Expert

“While rent-to-own schemes can offer price stability by fixing the sale price at the start of the rental period, they can also work against you if there's a market downturn. That’s why you still need to do your due diligence on the property and area you’re buying into. In the long run, property values generally appreciate, but short-term fluctuations do occur."

Mansour Soltani, Money.com.au's Home Loans Expert

Rent-to-own providers in Australia Some of the well-known rent-to-own home providers in Australia include Home 2 Own, Nicheliving, PublicSquare and OwnHome. It’s important to research providers carefully before you commit.

Where is rent-to-own available in Australia?

Greater metropolitan Sydney

Wollongong

Newcastle/Central Coast

Tweed

Greater Brisbane

Gold Coast

Townsville

Canberra

Select areas of Western Australia

Home loans guides & resources

What's the next step on your property journey? Our home loan guides will help you navigate the road ahead, whether you're buying, building or looking to save on an existing loan.

How Rent-To-Own Homes Work in Australia