Rent-to-own startup OwnHome has moved closer to launching its product, following the completion of an A$3.6 million capital raising.
The company’s co-founder James Bowe believes it has an appealing proposition in a residential property market that is getting out of reach for first home buyers.
OwnHome will buy the property for customers, who enter a lease agreement and an option agreement.
The option to buy the property from OwnHome can be exercised any time from year three to year seven. The price will be OwnHome’s purchase cost plus an increase of 3.8 per cent a year.
A portion of the monthly lease payment acccrues as purchase credits, amounting to 2.5 per cent of the value of the home each year.
OwnHome does a serviceability assessment of the customer to determine what the price of the property will be and then allows the customer to choose a property in that price range.
OwnHome will be the title holder until the option is exercised and will use debt to purchase the property.
Bowe said the company is not far away from launching the product and already has a wait list.
OwnHome got its initial funding from Commonwealth Bank’s x15 Xccelerate program. Investors in the capital raising that closed last week include Global Founders Capital, Entrée Capital, AfterWork and InVentures.
Bowe said the rent-to-own model is well established overseas but undeveloped in Australia. Given that “it gives first homebuyers the opportunity to save for their home while they live in it”, he expects the model to find a responsive market.