Australian rent-to-buy startup courting regional homebuyers

OwnHome founders James Bowe and Tim Harley. Photo: Supplied
OwnHome founders James Bowe and Tim Harley. Photo: Supplied

A newly launched rent-to-buy platform is reporting interest from budding homebuyers in Wollongong and Newcastle following its first expressions of interest round.

Startup OwnHome aims to eschew the traditional deposit-saving phase by purchasing a property on behalf of an individual and then renting it back to them for a set period while they accrue 'equity points' of 2.5 per cent of the purchase price each year.

Renters then have the option to purchase the property at a pre-agreed strike price, calculated as the purchase price plus 3.8 per cent per annum for each year of the agreement.

This theoretically allows them, in a rising market, to capitalise on any additional capital gains realised during the rental period.

"Customers realise all of the growth rate," co-founder Tim Harley said, pointing to recent price growth rates in Sydney.

Monthly payments are calculated at 7.05 per cent of the original purchase price, on a per annum basis.

Monthly payments are "roughly equivalent" to what someone saving for a similar property might pay by renting and saving money each month, although the company acknowledges they could be more expensive in some situations.

The company recently began taking expressions of interest from prospective homebuyers in Sydney and surrounding regions.

Co-founder James Bowe said that within 10 days of expressions opening,130 applications had been received.

While applicants had "disproportionately been in Sydney", there had been applicants seeking housing in Wollongong and Newcastle.

The company is initially planning to work with clients looking for property in the Wollongong, Newcastle and Sydney markets as well as parts of the Blue Mountains.

"I think there has been a fundamental shift coming out of COVID-19 that has put a premium on space a place of work, school and their living space. [In addition] work dynamics have shifted and what was previously too long of a commute has changed," Mr Bowe said.

Sicona Battery Technology founder Christiaan Jordaan is hoping that OwnHome will allow him to relocate to Wollongong, where his pilot manufacturing facility is based, without needing to rent another property.

"It couldn't have come at a better time," he said.

Christiaan Jordaan is hoping to use OwnHome to secure a property in Wollongong. Photo: Supplied

Christiaan Jordaan is hoping to use OwnHome to secure a property in Wollongong. Photo: Supplied

Mr Jordaan explained that the majority of his savings had been tied up in his business, which is in the startup phase, meaning he would need to spend time saving for a deposit before he could consider buying in the fast-moving Wollongong market.

"We invested all of our savings into a startup that we're looking to commercialise," he said

"All of my wealth and all of my capital is tied up in the capital in the company," he said, adding that he was now at a stage where he was able to draw a salary from the company.

Despite a higher monthly cost, renting-to-buy meant that Mr Jordaan and his family would gain the "stability" a rental can't offer.

"The idea would be to know I've got a house which I can call my own," he said.

"Now more than ever we want to get out of this apartment," he added.

Under the OwnHome model, they wouldn't be subject to the same restrictive rules as a tenancy, Mr Jordaan said.

"For my wife and I, we are thinking of starting a family. We want to have a bit of a garden... we've wanted to get a dog for so long," he said.

Although Mr Jordaan doesn't need to come up with a deposit under the OwnHome model, he would still need to pay a 1.5 per cent 'starter fee' and a 1 per cent 'settlement fee', which counts toward his equity credit.

Finder Home Loans Editor, Sarah Megginson said that products like OwnHome could work for certain buyers, but that prospective customers should make an individual assessment based on their financial situation.

"They suit a certain person, or a certain market, [but] the really important thing [to understand] is that you're going to pay a premium for the service," she said.

The product was a form of "forced savings," Ms Megginson said, and allowed buyers to "pay a premium" in order to get a foot on the property ladder now instead of waiting.

She advised buyers interested in platforms like OwnHome to consider their exit options should they experience a change in circumstances and to "read the fine print".

Mr Harley said that OwnHome customers who no longer wished to live in their property could choose to exercise the option, get a mortgage and then rent the property out, or sell their "value-accrued" option on to another customer.

This story How this Wollongong buyer hopes to land a 'forever home' without a deposit first appeared on Illawarra Mercury.