This is a great way to get numbers to work when they dont! (BTL that is with
slightly negative cash flow)
Its a great way to get buyers to buy before they are to qualify for a mortgage
(e.g. Buyer with money but new to the UK)
Properties that are for sale and don’t stack can easily be bought on a lease
option for little or no money
Then under better marketing and management rent to a motivated buyer who
has an option to buy it later.
Remember though you will need leads from both sides of the fence.
You need to find property and you need to have buyers on a rent to own basis
so that you can work on the famous sandwich option principle.
It means you are the meat in the sandwich!
You sit in the middle arranging the vendor and the buyer.
When you have them in place you have a nice deal where you promised to
pay the mortgage and rent out to the buyer.
The buyer pays you a premium e.g. £10,000.00 and you ask him to overpay some rent
on the basis that they will use some of that overpayment towards the profit.
That’s entirely up to you and of course the Vendor. If they are not motivated
to sell short term because they want a better price then you know you can get them to wait longer.So anything from 3
to 15 years is possible.
How long and who with are also part of the profiles that you need to recognize
when you speak to either side.
Vendor: Should not be in financial trouble and should not be arguing about a
longer term arrangement.
Ideally the vendor just needs the pain of the house or flat removed because
they have to leave the country or generally need to be relocated.
Other scenarios may include:
Divorce but settlement needs to be made later
Financial constraint: Means its easier for the Vendor to allow you to take over the property as its a drain on
his or hers current other commitments e.g. he or she may have moved into a flat
with another person and may want to hold on to the house for their own reasons or security.
Their are dozens of other profiles and I’ll try to cover others in future blogs
A vendor or a buyer must not be in financial trouble, constraints yes but if
they are about to be repossessed or be made personally bankruptthen don’t take
You need financial knowledge of both the buyer and the seller must be in good
or fair financial condition.
Taking charge or people on either side who have money issues may well backfire
Its the vendor who must be sent away to be advised independently as well . The
buyer should be advised but its not as critical.
Always remember that when an option is taken and it backfires because the
vendor is not aware of an issue it will be your fault.
Why ?because you will be seen as the wheeler dealer not anybody else. So as a
so called expert its up to you make sure your deals are secure.
Your deals are dependent on the vendor and if they don’t take the independent
advice its a loophole for them to be able to retract from the deal.
Leaving you with an angry tenant buyer.
So due diligence is just as important with a lease option as it is for a normal