Do you want to buy the house that you’ve always wanted to live in, the house of your dreams?

Don’t have enough credit or big enough deposit to put down on the property of your dreams?

If you answered yes to the above two questions then this article will show you how you can achieve your dream and live in the house that you never thought you would be able to. This is achieved by using a unique property financing instrument called “lease option”. A lease option is sometimes referred to “rent to own” or “lease to buy” scheme.

Lease options are simple and allow you to have complete control of a property if you have trouble obtaining traditional bank finance. This means that you can purchase a property using a lease option despite not having a big enough deposit or excellent credit.

The way lease options work is by you leasing (renting) a property from an individual and then having a separate agreement with them which allows you the option to buy the property at the end of the lease term. This means that you could buy a property worth maybe double the amount you thought you could afford. The reason for this is because you negotiate a rent with the seller and therefore your payments can be significantly lower than the payments you would make to the bank.

Below Are 7 Steps That You Need To Follow To Purchase Your Dream Home For Just £1

1)     Ask yourself why you would buy a property using a lease option. If you have clean credit, have a sufficient enough deposit then it may just be better for you to obtain a conventional bank loan to buy your next private residence.

• If you are buying of a distressed seller that owes close to what his property is worth then it is possible to buy the property for £1 plus legal fees of around £600. Otherwise expect to pay the seller 3-5% of the market value of the property. Ask yourself, how much can you afford to pay as an option fee (to have the right to buy the property from the seller) The differences between the houses you can buy for by paying the seller 3-5% of the value to control with a lease option are significantly different to the properties you can pick up for £1. If you do decide to put down 3-5% of the market value, ensure that you agree with the seller for this option payment to be credited to your purchase. However understand that should you decide not to buy the property at the end of your rental term then you will lose this option fee.

• Ask yourself is the area your buying your next property in an area that you actually want to live in? There’s no point in buying your dream house in an area you don’t want to live in! Do not make this mistake that so many people make. If you find that you don’t want to live in that area then you will lose your option fee.

• The most important question you need to ask yourself is, “how will I finance this property at the end of the lease term and cash out my seller?” You need to have a plan otherwise you will lose your option fee. Only buy a property on a lease option if you know you will be able to finance it at the end. Speak to mortgage brokers/financial advisers to understand what you need to do to increase your chances of getting a bank loan if you have bad credit. If you are buying a property on a lease option because you don’t have a big enough deposit for a conventional mortgage then ask yourself “where will this money come from at the end of the rental term when I exercise my option buy the property?”

• The final question you need to ask yourself is “how much can I afford as a monthly payment” Your lease will be a FRI Lease (full repairing and insuring lease) which means you will be responsible for repairs which means a rental payment of 30% less than market rent is perfect reasonable. If you want to get really creative, it is possible to have a portion of your monthly payment go toward your purchase but expect to pay slightly above market rent in this case. However this will depend on what you agree with the seller.

2) This step involves finding a property that you’d like to buy. Ensure that you look for properties that you can actually afford. You can place an advert in your local paper to attract sellers. Use the following ad which can also be posted on a piece of paper through letterboxes of your target properties.

Professional Couple, Looking to Rent A 3+ Bedroom Property In The Local Area With The Option To Buy

This advert will ensure that only qualified owners call you. The types of sellers you want to be dealing with are those that do need a huge amount of money to move forward. They may even be sellers that have little or no equity or the sellers could be frustrated landlords.

3) If you’ve got your seller to agree to a lease option proposal the next step is to negotiate the terms of the lease option.

Negotiate:

• The Purchase Price

• Term of The Lease (12 – 60 months) Can be much longer if you are buying from a seller that does not have a lot of equity because they are not expecting any money – the money they receive will be paid to the bank so the term in these cases can be significantly longer.

• Rent Credits – Will a portion of the rent go towards the purchase?

4) Make your monthly payments. These are made just like renting a conventional property. You can pay these directly to the seller, in cases of where the seller has little equity these payments can be made directly to the bank and any surplus payment to the seller.

5) Look to make home improvements and increase its overall value. Any value you add to the property is your equity. The more equity you have in the property when you come to exercise your option the higher the chance of you getting a favourable mortgage in terms of interest rate and the amount you put down as a deposit.

6) Apply for a loan at the end of your lease term. Ensure you do this 2-3 months before your term expires. Make sure you use a mortgage broker, preferably one that has access to all the mortgage products in the market place.

7) Complete on your dream home at the end of your lease term. When you receive funds from the mortgage company, your solicitor will send the money to the seller. Congratulations! You are now homeowner living in the property of your dreams!

Learn How To Buy Property For £1 Without Mortgages & Without Deposits.

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Lease Options Home Study Course - Learn How To Buy Property Without Mortgages & Deposits Even If You Have Bad Credit.

Lease Options have been around in the UK since the early 2000s however as it was easy to obtain finance during this period a lot of investors bought property with mortgages. Since then obtaining finance has become a lot more difficult and over the last few years investors have found an alternative method to acquire and invest in property – lease options.

Lease options were originally a method to finance property transactions in America in the late 1970s and early 1980s at a time when prices dropped significantly and it became difficult for buyers to get finance to buy property.

Nuts and bolts of a Lease Option

• The buyer pays a sum of money to a seller for the right to purchase a property at a later date. This option money is agreed between the seller and the buyer and can be as little as just £1

• The buyer and the seller will agree a purchase price within specific period of time, it may even be that the buyer pays market value or higher than market value at the time when the option is exercised. In a downward market investors will want an option price which is slightly below today’s market value. In a rising market, an investor may be willing to take a risk and offer to pay higher than market value for a property.

• The buyer and the seller will agree a monthly payment that will be paid to the seller. In most cases this monthly payment will be 70-80% of the market rent but sometimes can be higher.

• Term of the option agreement is most commonly short in a rising market typically from one year to three years however in a downward market the term is much longer and can be anything from three years to five years and sometimes much longer.

• Option fee paid for the right to buy a property is non-refundable

• The seller is not allowed to refinance the property or sell the property to anybody else during the option period.

• If the buyer does not exercise his right to buy a property within the option term the buyer will lose his option fee and lose the right to buy the property at the pre-agree price.

• There is no obligation for a buyer to buy the property

Lease Options Home Study Course

How The Investor Profits

Once an investor has agreed a lease option the buyer can sell the property on a lease option to a tenant buyer. A tenant buyer is somebody that will buy the property but until he exercises his option he will be classed as a tenant. The only difference is that in most cases, he is treated as the owner and therefore is responsible for the maintenance and repairs.
The investor will commonly sell the property on a ‘rent to own’ or ‘rent to buy’ scheme.
An investor will sell the property on terms which are shorter than the terms agreed with the original seller.

For example, an investor may have agreed to pay £100,000 on a property worth £115,000 in five years and a monthly rent of £500.00
The investor may sell the same property to a tenant buyer for £120,000 on term of three years and a monthly rent of £650.00
The difference between the price paid and price sold by an investor is his profit and this is the same for difference in monthly rent.

The option fee the tenant buyer pays the investor is normally credited toward the buyers deposit and in most cases so is a portion of the monthly rent. This is done to make it easier for the tenant buyer to buy a property when it’s time for his option to be exercised.

Lease Option Benefits for Sellers and Buyers

Lease option transactions are structured by investors with motivated sellers. Why? This is because if a property was easy to sell then it would be much easier for the seller to sell it on the open market to a conventional buyer. Motivated sellers include people that may have lost their job, people facing repossession, etc.

An investor’s strategy is normally to get a property on the open market and either:

A) Sell the property to a tenant buyer on a rent to own scheme.
B) Sell it on the open market after adding considerable value. For example, splitting a large Victorian property in to flats
C) Rent the property to a conventional tenant and benefit from the extra cash flow. This can be an extremely profitable strategy however the investor must be aware that he will be responsible for late rent, possible arrears and maintenance. The advantage of this strategy is that the investor can benefit from significant cash flow and of course control and own a property without getting a bank loan.

Typically those that would consider a property on a rent to own basis are those that may not be able to qualify for a loan as they may have bad credit, they may not have a big enough deposit for a bank loan or they simply may not of been in the country long enough to qualify for a bank loan.

A tenant buyer buying a property on a rent to own basis gets to experience the benefits of home ownership by locking in a price but also gives them breathing space to repair any bad credit issues they may have or time to save for a deposit.

Lease Options Home Study Course

To learn how you can profit by using lease options to purchase property click here.

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