How Rent-to-Own Works in Australia

What is rent-to-own?

Rent-to-own is a way to buy a home without saving a deposit first. An investor buys the home you choose, you move in as the tenant, and you pay market rent plus a weekly contribution that becomes your deposit. From year 4 you can switch to a mortgage and buy the home. It's also known as rent-to-buy or lease-to-own, which all mean the same thing.

With PublicSquare's rent-to-own homes, you pay a contribution of 50% of your first-year weekly rent, fixed for the whole lease and paid each week on top of your rent into the property manager's trust account. Legally, each contribution is an interest-free loan to the owner. When you buy, it is repaid to you as your deposit, so you always know exactly how much deposit you have built.

The owner holds the title until you buy, and you hold the exclusive right to buy it. Your arrangement sits on three documents, each reviewed by your own solicitor before you sign:

• A standard tenancy agreement under your state's tenancy law, using the standard REIQ or REINSW templates, the same as any rental.
• A call option deed, which gives you the right, but not the obligation, to buy the home in years 4 to 8.
• An Agreement Between Buyer and Seller with the owner, setting out the price schedule, your contributions, the Owner's Sell-Back Guarantee and what happens in each scenario.

When you buy, you sign a standard contract of sale, as you would for any home.

Is rent-to-own regulated in Australia?

Yes. Rent-to-own is legal and regulated in Australia, though the rules differ from state to state. It earned a mixed reputation from informal vendor-finance deals with no licence, no fixed pricing and no protection if things went wrong.

PublicSquare's program is built to be the opposite. It is run by a licensed real estate agency (Queensland licence 4555627, New South Wales licence 10152702) that has operated since 2021. It uses standard legal instruments, a price schedule written into the contract from day one, a published fee list and independent legal advice for both sides. It is available in Queensland and New South Wales, with other states, such as Victoria, planned subject to regulation.

Why do people choose rent-to-own?

Long-term housing security

For many of our homebuyers, this is the biggest benefit. You have up to eight years in the home, and as long as you keep up your side of the agreement, you won't have to compete for another rental, move house, or worry about a landlord selling the property out from under you. If the owner does sell, the new owner takes over all your agreements. Our tenants tell us this matters enormously, given how hard it has become to find and hold on to a long-term rental.

Rent rises capped at 4% a year

Rents in many areas have jumped sharply in recent years, sometimes by far more than 4% in a single year. Under PublicSquare's program that can't happen to you: your rent is reviewed once a year and can rise by no more than 4%, or the legal maximum if that is lower. Your contribution never rises at all, so you can plan your budget years ahead.

A deposit you build from inside the home

Instead of saving a deposit while you rent somewhere else, part of every weekly payment is credited to you as your deposit. You live in the home you intend to buy while you build it.

No ownership costs during the lease

The owner pays the rates, building insurance and maintenance until you buy. PublicSquare's property team also finds, negotiates and checks the home for you, with no separate buyer's agency charge.

A price schedule written into your contract

Your minimum purchase price for every year you might buy is set before you move in, so you can see exactly what the minimum will be at any point in the lease.

Who is rent-to-own for?

Rent-to-own suits people who could service a mortgage but don't have, or don't want to pay, the upfront costs of buying right now: the deposit, Lenders Mortgage Insurance (LMI) and stamp duty.

It tends to suit people who:

• have steady income and can comfortably pay market rent plus the contribution;
• want to live in the home they will own, and plan to stay four years or more;
• are under 50 and want to buy in Queensland or New South Wales.

It isn't only for people without a deposit. Many PublicSquare homebuyers are business owners who would rather keep capital working in their business, high earners who prefer to keep cash free for other investments, and disciplined savers who want a set path and a written pricing framework instead of saving into a rising market.

What are the eligibility criteria?

• Age: all applicants must be under 50, so lenders will still consider you for a mortgage when you buy.
• Income: household income, expenses, debts and savings are assessed together. Up to two adult applicants can combine income, and you can include expected contributions from family.
• Credit: a credit score of 600 or more is preferred, but every application is reviewed individually, including past credit issues or bankruptcy.
• Residency: in some cases PublicSquare accepts applicants who are building their credit or waiting on permanent residency. Eligibility can differ for non-citizens, pensioners and people with disabilities, so check with a rep.

More than 65% of people who meet the minimum criteria at sign-up and go on to complete a pre-approval are pre-approved. If you're not ready yet, you get tips on what to improve before you reapply.

How does rent-to-own work, step by step?

Here is the full process with PublicSquare, from signing up to owning the home.

Step 1: Get pre-approved

Pre-approval is online and does not affect your credit history. You tell us where you'd like to live and share your household's income, expenses and credit position. Your application is reviewed, and you may be asked for more information.

You'll also speak with a PublicSquare rep in a 30-minute info session to talk through your goals. To finish, you sign a client agreement, with photo ID for each applicant, and pay a one-off engagement fee of $1,100 including GST. The fee is paid once, not per property. It's refundable, less a $75 + GST processing fee, for 12 weeks after payment or until the Agreement Between Buyer and Seller is issued, whichever comes first.

Pre-approval sets your buying power: the price range you can choose from, based on your household's income and expenses.

Step 2: Choose your home

You can choose any home in Queensland or New South Wales on the PublicSquare platform, within your buying power. Initial home values of $600,000 to $1 million are standard, and higher or lower values are considered case by case. For each area, PublicSquare lists a typical minimum entry point, which helps confirm which areas suit your budget during sign-up and pre-approval. For example, it's $1,000,000 in Sydney and on the Gold Coast, $900,000 in Brisbane, and $600,000 in Townsville and Cairns.

PublicSquare's in-house property team sources and negotiates the home, from both the open market and off-market. In Greater Sydney, price limits usually mean the options are apartments. Elsewhere, most homes are three- and four-bedroom houses, either established or new builds. When you find one you like, the team arranges an inspection.

Every home has to pass quality checks. It usually must:

• have no pool, retaining walls, steep slope or flood-prone land;
• have no unapproved extensions or detached sheds or dwellings;
• need no renovation or major repairs;
• ideally be built within the last 25 years;
• not be auction-only, and be vacant at settlement.

PublicSquare acts as the owner's agent, not yours, and the owner pays for this work, so there is no separate buyer's agency charge to you. You are always free to get your own independent advice. You still benefit from the professional buyer's agency work, because both you and the owner want the same thing: a high-quality, low-maintenance home bought at the lowest possible starting price.

Step 3: An investor buys the home

Sometimes a participating owner already owns the home you've chosen. Otherwise it needs to be bought from its current owner. Once you and an investor agree on the home, PublicSquare's acquisition team negotiates the best price it can, and an investor from our network buys it. Investors must keep at least 20% equity in the home and give personal guarantees on their contracts with you.

Before anyone signs, both you and the investor get independent legal advice and sign a legal advice certificate and statutory declaration confirming you understand the agreements. You can also ask your solicitor about registering your lease on the title, which can protect you if the home is sold, refinanced, or the owner becomes insolvent.

Step 4: Move in

When the purchase goes unconditional, the setup fee is due: nothing for a new home from our building panel, or 0.99% of the home's value including GST for an established home or an off-panel builder. Before you move in, you pay a fixed $2,000 bond and your first two weeks of rent and contributions, as with any tenancy.

Step 5: Live in the home and build your deposit

Each week you pay three things:

• Rent, set at market rates and paid into the property manager's trust account. It is reviewed once a year by rental appraisal, and rises are capped at 4% or the legal maximum, whichever is lower.
• Your contribution, 50% of your first-year rent, fixed for the whole lease and paid alongside your rent into the trust account.
• A support fee of $33 a week including GST, paid to PublicSquare by direct debit, which covers your support throughout the program.

The owner pays the rates, building insurance and maintenance. You pay your own utilities, as in any rental, and contents insurance is optional but recommended, at around $28 to $35 a month for $50,000 of cover. All up, most homebuyers spend $1,000 to $1,200 a week in the first year, including utilities.

You can keep up to two pets, and a pet over 20kg needs the owner's written approval. Repairs follow standard rental law. Subletting isn't generally allowed unless agreed in writing, though it can be an option in hardship.

Step 6: Buy the home in years 4 to 8

From year 4 until three months before the end of year 8, you can exercise your option and switch to a mortgage with the lender of your choice. The price is the higher of the contracted minimum for that year or an independent valuation, and your contributions are credited as your deposit. PublicSquare charges you nothing at this stage.

Most homebuyers plan to buy in year 6, 7 or 8, once their deposit has grown to more than $100,000 or 10% of the home's price, which puts them in a strong position for a prime mortgage.

The costs at purchase are the standard ones for any buyer: any extra deposit your lender wants, LMI if your deposit is under 20%, stamp duty, mortgage fees and home insurance. Grants and concessions may reduce these. You can't use the First Home Owner Grant towards your upfront costs to move in, but you may become eligible for grants when you complete your purchase with a mortgage. You don't need to move furniture or change anything about your home, not even your utilities, because you already live there.

Step 7: Or exit through the Sell-Back Guarantee

If you can't get a mortgage, you can keep renting until the end of the lease, or request an open-market sale and receive your contributions back, less any shortfall. The section on changing plans below explains exactly how.

What happens each year, and how much deposit will you have?

On a $750,000 home renting for $650 a week, your contribution is $325 a week, or $16,900 a year. Here is how the eight years play out, and what your deposit and minimum price look like if you buy at the end of each year.

To run your own numbers, try the Rent-to-Own Deposit Calculator.

How is the purchase price set?

Your price is set by a schedule written into your contract before you move in. When you buy, you pay the higher of the contracted minimum for that year or an independent, certified valuation. There is no maximum. The minimum grows by 8% a year for a year-4 purchase, stepping down by 1% each year to 4% a year for year 8. These rates apply to houses; apartments may have lower rates, because they typically appreciate more slowly. From year 6 it sits below the national long-term average of 6.8% a year for houses.

The growth rate applies to completed years, not time elapsed

This detail is easy to miss, and it works in your favour. The growth rate for the year you buy is applied to the completed years before that year, not to the exact time you've lived in the home. Buy at any point in year 6, and your minimum is the starting value grown at 6% a year for five years.

That has two benefits:

• Buying later in a year costs no more. The minimum is the same on the first day of year 6 as on the last, while your deposit keeps growing every week.
• Your minimum price can be quoted exactly in advance. There's no daily or monthly recalculation, so you and your lender know the figure for any year you might buy.

Measured over the time you've actually lived in the home, the effective growth rate is lower than the headline rate. Buy in the last months of year 8 and it works out at about 3.6% a year, only a little above the Reserve Bank's 2–3% inflation target and well below the 6.8% long-term average.

A worked example

On the $750,000 example, buying in year 6:

• Contracted minimum: $750,000 grown at 6% a year for five completed years is $1,003,669.
• If the home values at $1,100,000: you pay $1,100,000. Your $101,400 deposit leaves a loan of $998,600.
• If the home values at $950,000: you pay the minimum of $1,003,669. Your deposit leaves a loan of $902,269.

Other details that matter

• Established homes grow from the day you move in.
• New homes bought off the plan may have a capped growth rate during construction, based on the expected build time. If so, it is written into your agreements.
• Apartments typically appreciate more slowly than houses, so they may have lower minimum growth rates in the contract. The rates in this guide are for houses.
• If you and the owner disagree on a valuation or rent appraisal, either side can get a second or third opinion, paid for by the side that disagrees. The final figure is the average.

What does rent-to-own cost?

No deposit, and limited additional costs. Here is every cost in PublicSquare's program, when you pay it, and what it comes to on the $750,000 example.

There is no stamp duty or LMI to start, because the owner buys the home. You may pay these when you complete your purchase, typically in year 6, 7 or 8. We compare these costs with every other way to buy in How to Buy a Home With No Deposit in Australia, and you can check your own figures with the Rent-to-Own Calculator: Upfront Cost vs a Mortgage and the Weekly Cost Calculator.

How does rent-to-own compare with renting or a mortgage?

Rent-to-own costs more each week than renting the same home, because part of every payment is your deposit. You're not just paying rent: you're building up a deposit you'll use when you buy the home.

What protections do you have?

Each of these is a term of your written agreements, not a promise:

• A licensed agency. The home is sourced and negotiated by PublicSquare's licensed in-house property team.
• A written price schedule. The minimum price is set before you move in, and you pay the higher of it or an independent valuation.
• Your contributions are your deposit. They are recorded on an Exit Statement, so there is never any doubt about what you have paid.
• Up to eight years of secure housing. While you keep up your side of the agreement, you stay in the home, and a new owner must take over your agreements.
• Capped rent reviews. Rent can rise by up to 4% a year, or less if tenancy law requires. The contribution never rises.
• A published fee list, and no rates, insurance or maintenance to pay during the lease.
• Investor safeguards. Owners keep at least 20% equity, give personal guarantees, and must repay all your contributions plus a $10,000 relocation fee if they sell or transfer the home in breach of the agreements.
• The Owner's Sell-Back Guarantee if you can't get a mortgage in years 4 to 8.
• Tenancy law throughout. Notices, bonds and repairs follow Queensland and New South Wales tenancy law.
• Independent advice. You get the full contract before you commit, and both sides must get legal advice before signing.

What if you can't get a mortgage?

You have two choices. You can keep living in the home for the rest of the lease while you strengthen your application, or you can use the Owner's Sell-Back Guarantee to request an open-market sale at any time in years 4 to 8.

The guarantee is provided by the owner under your Agreement Between Buyer and Seller, and PublicSquare runs it as the owner's agent. To use it, you give written notice with three formal rejection letters from brokers or lenders, and you must be up to date with your payments. The owner is required to accept. Then:

• PublicSquare manages the sale, aiming for the best price. You pay a fixed $3,300 marketing fee, and the owner pays the sales commission.
• You keep paying rent and contributions until settlement, and move out five days before settlement.
• At settlement you receive your Exit Balance: your contributions, less any payments still owing and any shortfall if the home sells below the contracted minimum. Any sale proceeds above the minimum belong to the owner.

Before you decide, PublicSquare can give you an indicative valuation of the home. If values are temporarily below the minimum, you can stay up to the end of year 8 while your deposit grows, the minimum growth rate steps down and your mortgage position improves.

What if your circumstances change?

If you hit financial hardship

Tell PublicSquare early. We will talk to the owner on your behalf, and we may be able to arrange to defer your contributions until things settle. Any change to your payments needs the owner's written agreement. Staying up to date matters, because the Sell-Back Guarantee depends on it.

If you leave early or stop paying

This is the main risk to weigh. If, as a last resort, you default and move out, the owner issues an Exit Statement and keeps your contributions as the exit fee. If payments are still owing beyond that, the owner may recover them over a period of at least 60 days. All notices are issued by licensed property managers under your state's tenancy law.

Compare that with a mortgage: if a lender repossesses and sells a home for less than you owe, you remain liable for the whole shortfall, plus interest, fees and enforcement costs.

If the owner wants to sell

The owner can offer the home to you if you're ready to buy, or sell it to another investor who takes over all your agreements. Your lease and your option carry on unchanged. If an owner sells or transfers the home in breach of the agreements, they must repay all your contributions plus a $10,000 relocation fee, and further damages may apply.

If the owner gets into financial trouble

Owners must keep at least 20% equity in the home, and your contribution gives them extra cashflow to stay on track. If an owner is still at risk of insolvency, they must tell PublicSquare and, where possible, sell the home to you early. If that isn't possible, the home must be sold under the agreements, and the owner must pay back all your contributions plus a $10,000 relocation fee. Further damages may also apply.

Registering your lease on the title adds another layer of protection. Your solicitor can arrange it for a small fee, usually $300 to $500 plus GST.

If prices fall

You pay at least the contracted minimum, so a falling market does not lower your price. If a valuation comes in below the minimum, some lenders may still recognise the contract price. If not, you can seek other finance, cover the gap from your contributions, or keep renting until the market recovers, up to the end of year 8.

If you reach the end of year 8 without buying

You have just under five years, from year 4 until three months before the lease ends, to either buy or request a sale. That's plenty of time to get everything in order. However unlikely, if you do neither, all the agreements end and the owner keeps your contributions as the exit fee. With the Sell-Back Guarantee available throughout the window, this should never need to happen.

Is rent-to-buy the same as rent-to-own or lease-to-own?

Yes. Rent-to-own, rent-to-buy and lease-to-own are names for the same idea: you rent a home with an option to buy it later.

Vendor finance is different. The seller finances your purchase instead of a bank, usually under an instalment contract, and the terms vary widely from deal to deal. Shared equity is different again: the government or another third party owns part of your home alongside you.

What should you ask any rent-to-own provider?

Terms vary a lot between providers. Before you sign with anyone, including us, get clear written answers to these:

• Is the provider a licensed real estate agency in your state?
• Who owns the home during the lease, and can you register your interest on the title?
• Is the purchase price, or the way it is set, written into the contract?
• How much of each payment builds your deposit, and how is it recorded?
• How much can the rent rise each year?
• How long can you stay, and what happens to your lease if the owner sells?
• What happens to your money if you can't get a mortgage or need to leave?
• What are all the fees, and when is each one paid?
• Will both you and the owner get independent legal advice before signing?

When is rent-to-own not the right choice?

Rent-to-own is built for people who could service a mortgage but don't have the deposit. It is a poor fit if:

• You have a 20% deposit already. A mortgage today will usually cost you less.
• You might move before year 4. That is when your option to buy opens.
• Your income may not support a mortgage later. A lender still has to approve you when you buy, and no one can guarantee that decision years ahead.
• You want the cheapest weekly cost. Rent plus the contribution costs more than renting the same home.
• You want the flexibility of an ordinary rental with no commitment.
• You're 50 or over, or buying outside Queensland and New South Wales. PublicSquare's program doesn't cover you yet.

Written by

Jarrod Wills

Property Lead

Licensed agent · Former mortgage broker

I was a mortgage broker before joining PublicSquare, so I look at every property and every purchase the way a lender would. I now lead the property side of the program, helping homebuyers from their first info session through to move-in, and working with our buyers agency team on each acquisition for our investors.

Reviewed by

Dean Arnold

Founder & CEO

Licensed real estate agent

I started PublicSquare in 2021 to give homebuyers a real path to ownership without a deposit, and investors a stronger-cashflow alternative to a standard rental. I hold real estate licences in Queensland and New South Wales and personally review every property that enters the program.

Read more about Rent-to-Own.

This article is general information only and does not take your personal circumstances into account. PublicSquare is a licensed real estate agency, not a financial adviser or credit provider. Consider seeking independent advice before making a decision.