Lease Options – what it is and why it works
If you are strapped for cash and looking to buy a property for the first time especially when the economic conditions in UK are at the lowest, then Properties Discounted have a property agreement option which can be the difference between you being a Landlord or a tenant. This agreement is known as a “Lease Option”.
The concept isn’t new to the property world and is already in practice in US and many overseas markets. Property Lease Options are now quickly catching up in UK which aims to attract hard-up buyers and landlords in search of reliable tenants. The variations of lease options that are being offered by companies are both attractive and have their pros and cons for both owner and buyer/tenant. At Properties Discounted, we take the hassle out of finding the Lease Option which is best for you.
Lease Option Mechanism: How it works
- Both parties agree to a prospective price usually at the end of the rental period e.g £100,000 at the end of a rental period of 3 years.
- The buyer/tenant pays an upfront amount of 2-3% of the market value and starts using the property.
This mechanism is much better than paying 5-20% of upfront payments that used to be the case in traditional buying agreements. At Properties Discounted we can manage the whole process for you, so it works just the way you need it to in order to make your investment sound.
Benefit for the Buyer – why choose a Lease Option
- The buyer can easily plan to save and plan the financials as they have already agreed to a final price.
- The longer the lease agreement and the security of having the property at the end period reduces the amount of “dead” rent money going to waste.
- The buyer doesn’t have to get into the hassle of buying the property at open market rates.
- Since the buyer is moving to a new area then he can easily get a feel of what that area is like to live in and the adjourning facilities on offer.
- Since the buyer is already occupying the property he/she can easily avoid the moving cost.
- It gives flexibility to the buyer to sell their existing property or business and manage the financials at the same time giving them a reliable shelter.
Benefits of Lease Options for Landlords
- Its best suited to landlords who own a number of properties and they want to sell some of them in an allocated period of time.
- With long lease agreements the seller can easily avoid the heavy maintenance overheads and redundant times when the property wasn’t under rent.
- It offers protection against the depreciation of property with respect to time.
Benefits of Lease Options for investors
- There may not be the need to get a mortgage, pay a large deposit, and no credit checks will be necessary, freeing up more money for you to spend on other assets
- The yield on the investment will be calculated depending on the expected rent the property could bring in at any more time, meaning the return on investment has the potential to be high, a factor which should always be taken into consideration when looking for a sound property investment through a lease option.
A leasing option works both ways though, if the price of the property appreciates more than the decided price at start of the contract then you as the investor can be in profit at large. In cases where a property depreciates in the allocated time then the buyer can be at loss.
In case of forfeit or if the tenant wants to buy the property by the end of the lease period then any upfront money or any other money that the tenant would have paid in addition to the market rental rate for this lease option, may be held by the landlord depending upon the modalities of the agreement. This means better flexibility and guaranteed income for you. At Properties Discounted our team will help you plan your Lease Option, and we can even help you buy or sell one. Please feel free to call us, 24 hors ad day, 7 days a week, 365 days a year on 0800 7 999 999.
