The business model for most lease options is for the investor/buyer to position themselves between the owner/seller and a tenant with five objectives in mind.
Objective 1– Achieve continuous cash-flow with a low entry level of initial capital from the property and target a net annual return on investment of 30%+.
Objective 2 – The property increases in value above the sellers agreed fixed purchase price within the option period; this allows the buyer to cash in by exercising the lease option. (We call this the cherry on top!)
Setting a Property’s Value and Agreeing a Future Purchase Price-
Because the agreed future sale price has to be locked in at the beginning of the agreement, it is crucial that the investor negotiates a realistic purchase price so there is a reasonable opportunity to sell the property above the future price at the end or during the option term.
Protecting your investment –
Common misconceptions are leading investors who invest in lease options, to enter new tenancy agreements by putting themselves on the tenancy agreement as the “landlord”.
The model for lease options is great – but like every investment strategy it has advantages and disadvantages. Legally, only an owner of a property can grant an assured short hold tenancy (AST) agreement.
The owner needs to remain on the tenancy agreement;the option taker will become the property manager and benefits from the rental payments, in exchange for the financial liabilities of the property.
Begin with the end in mind – See the deal from start to finish and create a win/win scenario
Understand why you are investing in lease options and have a target for where you want the investment to end up before you commit. Understand that lease options are built on the premise of a “WIN/WIN” situation.
Have you always wanted to invest in property, but don’t have the funds for a big mortgage deposit? Maybe you can’t get the funds due to self-employed status or you just want a 30%+ Return on Investment
Whatever the reason, if you are interested in investing in property, have the passion to be a property investor, we have the solution for you!