Have a Back-Up Plan

This is one of the most important I feel of the top five tips to avoid lease option problems.  It links well with part one in our series of Lease Option blogs also.  Some investors are so keen to get going with lease options, which isn’t always a bad thing, that they sign up property option deals without considering the ‘what ifs’.  What I mean by this is what happens if the tenant you have put in the property doesn’t pay you the rent on time one month?  Do you have enough cash to continue to pay the monthly option commitment until the tenant does pay?

Consider a Contingency Plan

Consider a contingency plan.  Do you have a small cash reserve you have built up that can pay for your monthly commitments if the rent or your income changes?   Perhaps relatives or a business partner may joint venture and offer secured funds if they are needed.  As part of the process of taking a lease option, include ‘having a back-up plan’.

Thinking Point – consider putting any tenant fees you decide to charge in to a pot for times when you need some cash.  You might be surprised how quickly a contingency fund builds.

What is coming up in our next blog?

Our next blog, part 3 of the top five tips to avoid lease option problems, will discuss not relying on the market when signing up a lease option deal.  Remember, if you cannot wait for part 3 of my top five tips to avoid lease option problems then check out our educational products here.

The Top Five Tips I Have Learnt Personally to Avoid Problematic Property Options.

As a specialist in Lease Options and having used them personally for many years I have learnt some invaluable lessons in avoiding bad Property Options.  If you are a newcomer to the Lease Options Made Simple website you can learn more about us here.  Having made the mistakes ourselves we are well place to help you avoid lease option problems.  Over the next 5 blogs I will share with you my top five tips:

1.  Don’t Be Too Eager

It may come as a surprise to some of you but one of my very first Lease Option deals ended up costing me over £8,000.  At that time I had been learning Lease Options as fast as I could.  I was full of energy and spirit.  I had just discovered a way I could control and profit from property I didn’t own and I could not wait to do as many deals as I could.  And that was the mistake.  I was too eager to take any deal I could find.

My tip is don’t be too eager to get the lease option deal done.  Take a step back and look at all the information you have again.  If there are any gaps, fill them in.  Ask more questions if you need to.

Thinking Point – imagine a lease option is like the Sistine Chapel ceiling.  Close up it can just be a mix of colours that doesn’t show the whole picture.  But take a step back and you will see the beauty…

Can’t wait for the next blog when we explore ‘having a back-up plan’?  Why not invest in our educational products and learn all about my top five tips to avoid lease option problems and much, much more.

Lease Option Education In The UK Can Be Overwhelming – To Whom Should You Really Listen?

As someone interested in lease options, you have probably read a lot of very interesting articles on property investment and how to be an investor.

But when it comes to lease option education – who should you really listen to?

Choice of Lease Option Education Increasing

The number of lease option and property investment educators seems to be ever increasing. With everyone vying for your attention the choice of products, services and courses can be bewildering.  Too much choice can confuse, and it’s natural to walk away from something that confuses.

What Investors Want from Lease Option Education

I often enjoy talking to serious investors interested in using lease options with property.  They tend to want one or more of the following:

• Build an income by finding and selling property deals to other investors
• Create an ongoing, sustainable and passive income by building a personal portfolio
• Meet with trustworthy and capable joint-venture partners.

Of course, it is not as simple as reading a book and attending a one-day course! You won’t instantly have the skills and knowledge to use lease options overnight.

Some Challenges to Applying Lease Option Education

• Bridging that gap between knowing and applying – saying to yourself “1, 2, 3 Go!” instead of always finding reasons to start tomorrow.
• Applying lease option education in the way it was meant to be applied – we all interpret ideas and words slightly differently.
• Finding genuine and trustworthy partners with more experience than you.
• Deciding which sellers to work with, and which to avoid, knowing when to say “No!”

Lease Option Education You Can Trust

Our lease option education provides much more than just an enjoyable read or ‘shelf-improvement’. Lease Options Made Simple provides a solid foundation to assist you in achieving the freedom and wealth that you are looking for through property investment. We offer warm encouragement with a personal approach and the invaluable lessons that over 750 combined property deals have taught us.

If you have explored our site, enjoyed our blogs and taken note from our articles then why not take your investment further?  Lease Options Made Simple offers lease option education that will not disappoint you.

Click here to discover more about lease option education you can really trust.

A Lease Option agreed recently allows a trapped house seller to find comfort from the pain of being a tired landlord.

Janet had been a landlord for some time and unfortunately her health had been deteriorating in recent time.  She needed a solution that allowed her more time to focus on restoring her health whilst maintaining an income.

Janet owned a 4 bedroom semi detached house outright and had been letting the property for £500 per calendar month for a number of years.  The last tenant had just left and being a tired landlord Janet decided to sell.  The market conditions didn’t allow for a quick sale at the price she felt was fair but finding and managing another tenant was the last thing any tired landlord wants.

The property was in reasonable condition and didn’t need a large amount of work to attract a new tenant.  Janet had always preferred professional tenants but by accepting housing benefit for the house it was possible to increase the rent coming in to £650 per month.

The agreement gave the owner £450 pounds per month which is credited to the purchase price, which had been agreed at £120,000.  With no maintenance or insurance costs to be concerned about any more this tired landlord was happy to take a reduction on the income she used to receive.  A lease option provided the ideal solution for the landlord when she needed it.  A lease option signed through a solicitor gave Janet the confidence to work with us and gave her the comfort she needed from the pain of being a landlord and most importantly allowed her to focus on improving her health.   A lease option enabled the buyer to be pay down the purchase price every month whilst creating cash flow through the housing benefit strategy.  A win, win situation was created by the harnessing the power of a lease option.

If you are a tired landlord and need the relief of being free from the burden of tenanting and maintaining a property then contact us today.  The freedom you need may be found in a lease option.

Divorce and Lease Options

Lease Options and Divorce – should you as a Lease Option Property Investor get involved when relationships fall apart?    The sad reality is relationships do fail and very often the first question that needs to be addressed is how to dispose of the family home.  We are asked every now and again whether getting involved in lease option deals when vendors are divorcing is a good idea or not.

Relationship breakdowns can come in many forms, and to consider if a lease option is workable you must first discover the depth and complexities of the breakdown itself.

For instance there is clearly a difference between the end of a marriage and the break up between boyfriend and girlfriend.

In England and Wales there are three considerations when applying for a divorce:

• Financial settlement.  This is often referred to as ancillary relief
• How any children of the marriage will be effected and their welfare
• The ending of the marriage.  This is often referred to as the dissolution

It is a court of law that makes decisions on how the divorce is handled based on an act of parliament passed in 1973 (Matrimonial Causes Act).  The court will always consider any agreement reached by the divorcing parties.

However amicable a divorce, time inevitably plays a part.  The question of time is central for the lease option investor.

Another factor which you need to take in to consideration is the psychology of each joint owner.  Knowing the couples plans once divorce has taken place is often crucial.

Why do you think that is?   What information do you think you would need to understand whether a lease option is suitable?

What do you suppose may happen if one or the other sellers plans to re-marry?

Legally, there is a chance depending on time scale that by re-marrying one of the vendors will waive their right to ancillary relief (financial settlement) which could affect the outcome of any lease option agreement you have in place.

Where there is little or no equity in the property both a lease option and a divorce may be easier to agree.   For a lease option investor this provides an opportunity to weave the magic and put an agreement in place that allows everyone to move on quickly.

It is still possible to use a lease option in the situation where there is equity in the house.  In my experience, a lease option can only work when the parties are fully agreed and committed to the future allocation of proceeds.

To summarise, as a lease option property investor, should we get involved in deals when vendors are divorcing?   The situation and the solution needs to be clear to all parties and most importantly agreed by everyone.  With any agreement you need the light bulb moment when all involved realise that with a little cooperation and the input of time a real solution can be found in a lease option agreement.

Lease Option Agreements Explained

‘Option’ is the key word in our heading. Why? Simply put, a property option allows freedom of choice for one party – the buyer.  What a property lease option agreement achieves is freedom for the buyer to buy or not to buy a property. The seller, however, must sell, and has no choice.  From this we can see that a lease option is a unilateral, legally binding document. Lease options can transform people’s lives.

Sellers can move on safe in the knowledge the property they thought was unsellable is being looked after and in all likelihood will be sold and bought at some point in the future.

Buyers can reduce the risk and large outlay of traditional property acquisition.  A property lease option agreement can cost many, many times less than the deposit normally needed to own and profit from property when bought conventionally.

Lease Option Agreements and Time

When you work with time, you are working with a force that no-one is able to stop.  Time is a powerful tool when used correctly, but can also overtake you if you are wasteful.  Using time cleverly and to your advantage can produce some amazing results. Just as time and sunshine can ripen sour fruit, time and a lease option can transform property that might today be considered risky or ‘bitter’ into something ‘sweet and juicy’.

Learning to Use Lease Option Agreements

We have packed in lots of useful information into our Lease Options Made Simple website to explain lease option agreements in a simple and easy to understand way. You will find even more information nicely packaged in some good value for money resources available our shop.  Our Lease Options Home Study Course will guide you past the pitfalls and demonstrate how you can use the power of time and lease option agreements to your advantage.

Lease Options Coaching – Some Questions and Answers With a Student.

Is property lease option investing for you?  Have you considered taking up lease option coaching? Are you in the process of learning about lease options and about to make a decision whether to invest in lease options coaching and support?

Well, to help you decide we thought it would be a good idea to ‘fly-on-the-wall’ with you and share some recent coaching we did with a lease option student.  We checked with them first of course and they have kindly given permission for us to let you in on some of the action. Look out for the benefits and lessons they have profited from.  We hope you will find some value in this too, as you become more familiar with lease options.

Lease Options Coaching, a Little Bit of Background

Our property options coaching goes further than simply offering a basic understanding of lease options. In this particular instance a student with a grasp of lease option investing principles is working on an assisted sale opportunity sale.  You will see that our student is marked as Student and our responses are in italics.

Student:  Thank you for your help so far. I have an update for you, and some more questions. I was, to begin with, concerned that the buyer may find out what I agreed to pay the seller and think I was being greedy with the profit I was going to make.  I just kept thinking of your saying “Win, Win, Win”. I also didn’t want the seller to feel hard done by when they realised I have sold it for so much. I have decided to keep my sale price at £142,000 after our chat last week.

You should never feel guilty about making a healthy profit on a property transaction.  After all, the seller will know in their own mind what they need to make the deal work.  It is only fair that in assisting them you will benefit too. One of those ‘Wins’ is for you and of course you need to earn a return on your investment of time and energy.

Student: I am meeting with the seller on Saturday afternoon to finally agree the deal.  He sadly couldn’t meet with me any sooner than that.

Good work.  Yes, get things the deal done and paperwork signed. 

Student: Do you have any advice for Saturday?  Is it important to note anything in particular?

Yes!  If you haven’t already done so, get plenty of photographs of the house inside and out, this will help you with your marketing. Pay particular attention to important, costly things such as the boiler, electrics and windows. Buyers will ask about the condition of the property and so modern electrics and boiler will always help you sell the property faster.

Student: I am a little concerned that the seller may ask for some money upfront to help with moving costs. Is this something you do personally and what is the best way to handle that?

Anything is possible! What will make the deal work for you and your seller is the main consideration. At times the seller will simply not be able to move on unless you pay something up front. Be careful and be sure not to do that outside of your contract or agreement.

We recently had a case with an investor buying a large property in Wales, and the investor agreed to make a payment out of good-heartedness before the contract paperwork was signed, and then “confessed” to us. We would never recommend you do that! You really need to protect yourself.  Anything you agree with the seller must be adhered to and should be in the paperwork.

Student: If the seller needs time to move out of the property, say 90 days for example, would you wait before getting solicitors and paperwork sorted or would you put everything in place in advance? I am worried the seller may change their mind if things take a while.

How do you feel about the seller?  Do you have confidence in their level of motivation? Will they see your agreement through? 

We have found that if you establishing strong rapport with people and gain a deep understanding of their situation you enjoy a huge advantage. You will be able to evaluate early on whether a deal will be strong. If you are in any doubt, hold back from spending money but still get your lock-out paperwork signed as early as possible.

We will be delighted to help if you would like lease options coaching and support.

What is a Lease Option?

What is a lease option? And can knowing what a lease option is help you to sell your property even in today’s market?

It is no secret that today traditional methods of selling property just aren’t working. Perhaps you’ve experienced this personally. You may even be looking for an alternative method to sell your property.

Well, a lease option is an alternative method to sell property which can often come up trumps when traditional ways to sell don’t work. By discovering and understanding the answer to the question “What is a Lease Option?” you can tap in to one of the most innovative, quick and convenient ways to sell property in today’s market.

 The Problem with Today’s Housing Market

The housing market across the country is on its knees because many buyers cannot borrow and many sellers cannot afford to let their property go at a discount.  Many estate agents across the UK report that it has become much more difficult to earn a living.

In an ever-changing world, selling property quickly and easily seems to be a thing of the past. Perhaps now is the time to discover a little more about how lease options work and exactly “What is a lease option?”

So What is a Lease Option?

A lease option is not a new method of buying and selling property. Until relatively recently something very similar was the standard way to buy and sell property in France. Huge swathes of property in the US, Australia and other countries have in the past been bought and sold using lease options. So a lease option is not a new-fangled, unreliable or untested instrument for buying and selling property. It is a well-established solution which comes into its own when the property market is slow or stuck. Understandably, and perhaps in part because they side-step the need for new finance, some financial institutions are not overly enamoured with lease options.

Now just stop there for a moment and imagine being able to buy and sell property without the need for new bank finance! Imagine being able to do that quickly and with a minimum of fuss. A lease option can unlock the door to many routes out of property.  Just consider the following:

• A lease option allows a buyer struggling to get bank a mortgage today to move in to a house while they build up a deposit or improve a shaky credit rating.
• A lease option allows the potential buyer to enjoy their new home from day one.
• When competition is fierce and the market is slow, a lease option gives the seller a huge financial advantage over those who can only reduce the purchase price to make the property more financially appealing.
• Lease options effectively widen the ‘buyer funnel’ making an otherwise unaffordable home attainable to many potential buyers.
• A lease option often allows the seller to achieve a better price than would otherwise be possible on the open market.
• A lease option is often the only way some sellers will be able to sell the house in the current market.

Lease Option Education is the Real Issue

In order to use lease options to their full potential more than one Estate agents, sellers and buyers need to learn the power of a lease option and use them to their full potential.

So How Does a Lease Option Work?

A lease option works in the following way:

• The seller and the buyer agree that the buyer can buy the property for a certain price within a set period of time.
• During this period, which is known as the option period, the buyer pays a monthly sum – like a lease.
• By the end of the time frame set out at the beginning the buyer either buys the property for the agreed amount or hands the property back in a good condition, and forfeits any payments made.
• During the option period the seller is unable to sell to anyone else, so the buyer has security and certainty.

Using a Lease Option – What are the Advantages?

 Advantages of Using a Lease Option for the Seller

• You can make your proposition more attractive than that of the competition.
• During the term of lease option the seller receives a guaranteed monthly payment whereas normally during a house sale the property is expected to be empty if the seller is not living there themselves.
• Because the seller is willing to sell with terms from a higher than market purchase price is often achievable. People will pay more for convenience.
• In a case where the seller really needs and wants to sell but can’t reduce the sale price a lease option allows them to move on.
• A lease option affords the seller more security and certainty than simply renting a property out to transient tenants.

Advantages of Using Lease Option for the Estate Agent

Can estate agents really afford to ignore lease options as selling solution?   What if a lease option used well brought the following advantages..?

• No need to turn away potential buyers because they are struggling to qualify immediately for a mortgage.
• Rather than being unable to meet the needs of a strongly motivated client, you have ideas which work in practice and can provide a genuine solution.
• You can collect a commission when the tenant buyer moves in rather than your client being forced into becoming a reluctant landlord.

Understanding the answer to the question we raised – “What is a lease option” can change the whole game for an Estate Agent.  It’s another string to the proverbial bow and another tool in the tool-bag.

Using a Lease Option – The Advantages for the Buyer

Imagine being able to live in a house and make it a home from day one! No mortgage needed!

Of course the lease option gives you a certain time frame within which you will need to buy, or walk away. You could always renegotiate the terms of your lease option agreement and extend the term. In a market that stays flat for a long time that would be a great solution for both sides, as it is unlikely that the seller will want the property back.

So if you want to exercise the option and own the home, you may need to get a mortgage at a later date, or buy cash and buy your home. It would be at this point that you would complete on the purchase and the title would now be in your name.

• You can move in and enjoy the property as your home from day one.
• The agreement may even allow you to rent the property out and make money from the arrangement.
• You don’t need to get new finance to get started.
• Remember – the opportunity is all about the property + finance – which often makes the whole deal much more attractive than simply buying a house for which you need finance.
• With a lease option the purchase price is agreed at the outset and if the property increases in value, either due to the market lifting or through improvements you have made, the gain is yours.

“What is a Lease Option”? Understanding  the Answer Means Having a Choice

A lease option is, in a nutshell, a property transaction mechanism which comes with huge advantages. It allows people to move in and move on. It can lift a market which is in the depths of depression, even if that positive effect is limited to only those who understand what a lease option is.

Of course, there are pitfalls to lease options too, anything that is this powerful and can be used to the advantage of buyers and sellers can also be misused. The buyer and seller will need to be aware of the pitfalls and get independent legal advice before entering into a lease option agreement.

All in all a lease option is a powerful instrument for change, and can open doors which are otherwise tightly shut. There are huge advantages for property sellers, estate agents and potential buyers alike. Whichever category you personally find yourself in, the key to benefiting from them is understanding the answer to that important question – “What is a lease option?”

To find out more about how to use lease options please see the Lease Options Investor Handbook.

FSA Warning on Lease Options Imminent

After a recent Radio 5 Live programme investigating how some UK investors have been misusing lease options with distressed sellers, the FSA is poised to publish a warning on lease options.

Sadly, some property investors – and even lease option educators, have been targeting distressed sellers (property owners with serious financial difficulties) and then not keeping to their part of the agreement.

Rather than caring for the property as if it were their own and ensuring the mortgage payment is made according to the contract until the property is bought or sold, a small number of unscrupulous investors have taken advantage of sellers and left them in a worse situation than before the option agreement was signed.

Lease Options Made Simple Basic Ground Rules

Here are some basic ground rules for using Lease Options well that Lease Options Made Simple has always held to and shared:

• There is a difference between ‘stressed’ and ‘distressed sellers’ – and lease options are not for distressed sellers.
• Distressed sellers are those who find themselves in serious financial difficulties, and there are other strategies that work better for them.
• Lease options and residential property work best together when the seller is financially stable, and is seeking freedom to move on to a new home, and not when they are running away from financial problems.
• Each new agreement needs to be ‘stress-tested’ to ensure it is viable and sustainable over time for you the investor.
• Sellers need to be presented with a Key Facts Document so they are informed of the potential risks of a Lease Option Agreement, and can make the best decision for them in their current circumstances.
• Sellers should always get qualified, independent legal advice before signing a lease option agreement.
• It is not fair to pressure a property owner to switch the mortgage to ‘interest only’ to make a lease option deal more profitable for the investor, and this approach can compromise your integrity as an ethical investor.

Please See These Previous Lease Options Made Simple Articles

• Lease Option Warning!
• Lease Option and Divorce – Should you Get Involved? 
• Suitable Seller Situations for Lease Option Investing.
• How to Avoid Potential Lease Option Legal Pitfalls.
• Should a Beginner Property Investor Use Lease Options?

FSA Comment on Lease Options

A spokesman for the FSA says: “The FSA is aware that some homeowners may be considering ‘lease options’ as a way to help them reduce the strain on their finances.

“These products may not always put the homeowner in a better place than if they were to sell their house under normal circumstances, and to that end we will shortly be publishing information on our consumer information website to help explain how they work and what the risks are.”

If you want to know more about how to use Lease Options ethically and as a genuine solution, why not consider investing in the Lease Options Investor Handbook here.

With the rising popularity of lease options as a solution for residential property owners who can’t move on, media interest in unscrupulous ‘investors’ abusing what can and should be a genuine win-win solution grows.

A programme recently aired on Radio 5 Live helps sellers understand the implications and risks of granting a third party a long-term lease option over a property they own. You can download a pod-cast of the programme by clicking on the link above, or at the end of this post.

Sadly, some investors, such as Phil Martin, have done little to recommend the investor community to those who can benefit from lease options, and clearly property sellers need to take steps to protect themselves from dealing with unscrupulous investors.

Lease options used well can be a powerful solution, and it is a good thing that stricter regulation may be imposed by the FSA and CML.

Transparency and Fairness in Lease Option Transactions Vital

For the ethical lease option investor coverage like this is an excellent opportunity to underline the importance of complete transparency in every transaction.

This interview further underlines a main point that Lease Options Made Simple has been making for years – that Lease Options are not the best solution for vendors who are in serious financial difficulty.

Richard Bowser, Editor of Property Investor News, a thoroughly researched and well written publication for property investors in the UK, also highlights the fact that there are some investors who are using lease options ethically and as if they were already regulated.

This is the approach we at Lease Options Made Simple have always espoused and supported.

For more information, or if you have been approached by a lease option investor and would like to know how you can protect yourself from rogue traders, just write to info@leaseoptionsmadesimple.co.uk

Listen to the recent Radio 5 Live programme on Lease Options as a pod-cast here.