Lease Options are a massive thing in property investment at the moment. They are the next big thing, and as always, people are charging fortunes just to teach you how to do it.
The technique has mainly come out due to the fact that mortgage lenders have become so tight when lending on buy to let properties. This system originated in Australia and the US, and has been used much more widely over there. It has been more commonly used over here in a commercial property sense, particularly with land deals. With that in mind, residential property investors started investigating it with the intention of using them to buy property and continue to build up their property portfolio.
I have been researching them for quite a while, as its important to do before getting involved in a new strategy.
To give it an idiot-proof explanation (which is often the way you will have to explain it to potential property sellers) it involves the following steps:
A long term lease of a property (negotiable, but generally three to five years).
This is accompanied by an option to buy the property at any point over the lease term.
Until the option is exercised, the buyer agrees to pay the mortgage and any other necessary expenses, such as building insurance.
The issues tend to be getting a potential vendor in agreeing to the technique, as often they will be looking for a standard sale.
It is not appropriate for some vendors, as they will need to make a quick sale, and potentially use any equity they have for moving to another property.
Those that it may work for typically are:
People relocating/ emigrating.
Investors who have grown disillusioned with managing their portfolio's.
Families downsizing, or going into rented accomodation.
For a slightly more in depth explanation, i recommend you have a look at the MS Law blog - solicitors who are specialists in this field.
I am currently working with a vendor who has put together a package of six properties for me to buy using lease options over a five year period.
Cheers!
