From Below Market Value to Lease Option Deals

Introduction to a Mandatory Paradigm Shift for Property Investors

The reason why below market value deals were so successful with investors was because it was perceived an easy-to-understand way of making money out of UK residential properties, with minimalistic cash investments.

But in 2010, things are very different. Historically, the mortgage drought that started in mid-2007 in United States reached UK by the begining of 2008  then deteriorated throughout 2009.

The current 2010 situation in the mortgage market is just a mere reflection of the global financial crisis, which I believe, is more a crisis of trust between investments, financial institutions and their regulators rather than a financial crisis per se.

The implications in the UK property market are profound, touching every market players from first time buyers to vendors, from estate agents to letting agents, from mortgage lenders to mortgage brokers, and from property investors to tenants.

Up to very recently, among all market players, ’smart property investors‘ or sophisticated investors always managed to find ways to pull out deals at 20%, 25%, 30% or even - for those with insider knowledge -  50% below market value. But things are very different as we said. No one knows how the global financial crisis will unfold, despite the media wanting us to believe that a recovery could surprise us any time.

The smart property investor has become a mere mortal man, just like any one else, he is no longer guaranteed to get a mortgage, despite an impeccable credit rating.

No one is guaranteed a mortgage!

The smart property investor due dilligence is no longer around the profitability of a deal but around the ability to get a mortgage or bridging loan for an acquisition or a buy to let re-mortgage to convert equity into cash.

Many good property sourcers or deal packagers have dropped their standards

As if things were not complicated enough, many good property deal sourcers and packagers have dropped their standards. 25% off market value? The market value is guaranted by a RICS valuation? But what does it mean in a falling market? Uncertainty!

But the market never rests, that’s a good things. The newer trends has become to shift from BMV to Lease Options Deals. This is confirmed by the fact that recently a number of property sourcers have started to offer Lease Options Deals.

So if you’re a property investor looking for lease option deals in UK, how do you know your favorite property sourcer or deal packager has maintained his deal quality when shifting from Below Market Value to Lease Options?

If you want to continue making money during this recession/depression, it is important to know answer to this fundamental question. It is important if you are a sophisticated investors, to understand how you could optimise the overall financial performance of your residential property investment portfolio by having the right mix of Buy-to-let versus Lease Options properties.

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