A homeowner or an investor can use the lease option concept to sell property in order to make substantial profits.
Lease option strategies are designed in such a way to make it easier for a seller to sell a property and easier for a buyer to buy a property. Investors can further expand on the lease option concept by combining it with a sandwich lease. Investors can also profit from the concept by flipping properties to other investors and buyers after adding substantial value or by selling their option for considerably more than the price paid by them. Homeowners can sell the property at a higher price to an individual that may not have a big enough deposit to buy a property through the conventional route of obtaining a mortgage.
Sellers may wish to consider the following when selling their property on a lease option:
•If the tenant is unable to obtain conventional finance by means of a mortgage, as a seller you are able to take a deposit of 3-5% of the market value as a non-refundable "option fee". This option fee will allow the buyer to buy the property at a pre-agreed price within a specific period of time. The buyer will then pay market rent until he purchases the property. Once the buyer is ready to buy within the option period the option fee comes off the purchase price.
•Legal paperwork to contain clauses which make the buyer responsible for full maintenance and repairs.
•Legal paperwork to contain a clause which allows the buyer to extend the option in exchange for a further option fee
•Legal paperwork to contain a clause which makes it possible for the buyer to assign his option to another individual.
•Using a solicitor that has experience in option agreements is recommended so that the paperwork is drawn up correctly.
Interested in buying a property on a lease option?
Buyers may wish to consider the following when purchasing a property on a lease option:
•Seek independent advice and understand what you will have to do in order to save up a for a deposit or repair any damaged credit which is preventing you from buying a property conventionally.
•Understand that the option fee you pay is non-refundable and you should you not purchase the property then this will be lost
•Agree a cap on expensive repair bills for example broken boilers. You may agree to split the cost of repair above five hundred or a thousand pounds.
•Ensure that your paperwork as a clause which allows you to assign your option to another individual, this means that should you have trouble buying the property then you can find somebody else to step into your shoes.
•Ensure that within your option agreement there is the ability to extend the option in exchange for a pre-agreed payment.
•Ensure that you take proper legal advice and make sure that your interest is noted at Land Registry.
Lease Option Strategies used by investors
Strategies used by investors include:
Flipping the lease option - this will involve the investor finding another buyer who will then exercise the option before its expiration date. Typically an investor will sell his option at a shorter term and a higher price than what he has agreed with the original seller.
Sandwich Lease Option
This strategy is used by investors in which they sublet the lease option to a buyer. The investor effectively sits in the middle and again the option will be sold at a shorter term and at a higher price than what he has agreed with the original seller.
How to find a lease option seller?
•Drop leaflets in a neighbourhood with "I BUY HOUSES FOR CASH" written on them.
•Place adverts in newspapers with a similar headline to the one above
•Look up landlords that may be frustrated in local newspapers or online directories and suggest the lease option concept
How to find a lease option buyer?
•Place an advert in a local newspaper which reads "Buy My House, No Mortgage Required" This will allow you to build up a list of buyers before you even have a property on a lease option.
•Contact mortgage brokers and pay them a commission for dead leads, especially cases in which clients may have been refused a mortgage.
Amandeep Sandhu is a UK (London based) property investor specialising in acquiring property using no money down strategies. Amandeep has written a home study programme titled "Secrets of Investing in Property without Money, Mortgages and Risk".
To find out how you can learn the secrets of investing in property without money, mortgages and risk, visit http://www.leaseoptionprofits.co.uk.
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