Investors have been using Lease Options as a means to buy property or to gain the same benefits of buying property without physical ownership for many years. This is a phenomenon that has become much more popular in the UK with the tightening of credit which has restricted many want-to-be investors from buying.
So what are lease options?
In simple terms, they are tools which allow investors to creatively take advantage of benefits such as rental income, capital growth and/or equity. Lease options come in varied forms and many are unique to the situation surrounding the property in question.
Lease Options are a creative way of benefiting from the perks of investing in property, often without the need to obtain a mortgage or finance. There are drawbacks involved and any investor looking to utilise Lease Options should seek the advice of a solicitor who is experienced in the field before attempting to enter into one. Many investors find the benefits on offer are worthwhile.
Basics of an Option
- Buyer pays the seller option money for the right to purchase the property at a later date.
- We agree to a purchase price now, which is usually the future purchase price.
- The term of the option agreement is generally from one to five years.
- The buyer can sell the option to somebody else.
- Nobody else can buy the property during the option period.
- If we do not exercise the option and purchase the property at the end of the option, the option expires.
- We are not obliged to buy the property.
- We will assign the lease option without seller approval to expedite sale in some circumstances.
Benefits of Lease Option
- A seller generally gets to sell their property which may be difficult in the current economic climate.
- The value of the property quoted on the lease option may be more than the current market value.
- Relief from paying a mortgage on a vacant property