UK Property Investment Forum & Blog

August 17, 2011

Are lease options new?

Filed under: BMV Deals,Buy-to-let,Financial crisis,General,Global economy,Housing market,Lease Options,property strategies — Tags: , , , , , , — sudeshnac @ 10:06 pm

In my last post, I explained why ‘Lease Options’ was the best and smartest property strategy in the current market conditions. However, is this a completely new idea or did it already exist somewhere in the uk, unbeknown to us? Well, actually, Lease options have always existed in the uk mainly within the commercial sector and has been used in buying and selling for a very long time, often being used by developers to acquire properties for refurbishment to improve value before purchasing to let out, or to just on sell to other buyers.

 Just because lease options have been commonly used with commercial property, there is nothing to prevent them being used with residential property either. The fundamentals of this financial instrument are identical in both cases. So it gradually evolved within the uk from around 5-7 years back, at first meeting with a lot of misunderstanding, criticism, suspicion and negative reactions from legal entities like solicitors, when it came to getting the legal aspects of the transactions completed. However, as we all know, market conditions began to change, particularly with the near collapse of the financial world, and the property boom, and few mortgage lenders willing to lend unless you had a 40-60% hefty deposit available, and house prices diving to crazy levels. First time buyers were virtually frozen out of the market and rental demands began to soar, in the wake of thousands unable to keep up with their mortgage repayments leading up to so many homes being re-possessed. Suddenly, where previous strategies like ‘buy- to- let’, ‘BMV and ‘no-money down’ began to get more difficult to maintain, Lease Options seemed to flourish and indeed  with a win-win viable option for all, and the most realistic strategy for the times we were living in, many jumped on the band wagon including the government with ‘Right to buy’ or ‘Shared Ownership’ schemes or ‘Rent- to-own’ schemes many property investors started to learn about it, going to courses etc to try to benefit from adapting this strategy to the hard-up investors and first time buyers who could not obtain a mortgage right now. Bringing the situation right up to date, the current global crisis in the economy including the unprecedented downgrading of America’s credit status, and the euro crisis are yet even more factors that can only put more pressure on our housing market in the Uk in the long run. So Lease Options may be here to stay for much longer than we thought….and perhaps become a panacea for many ills.

 Next week we will be exploring in more detail all these different schemes and aspects of lease options that have evolved and are still evolving in the UK house market, and to make sense of what lease options has come to mean to our property investors and buyers alike in today’s challenging world.  

 Till then, ponder on the above thoughts and try to research what on what the people around you perceive of lease options….you may be surprised by what you find!

 Sudeshna Choudhury

February 26, 2011

Oil Price and UK Property Investment

Filed under: General — Tags: , , , — francis.emery @ 12:57 am

A decade of UK property investment

Between 1996 and 2006, UK property was everyone and his kid sister’s investment of choice. Property investment was portrayed as guaranteed-quick-buck. All you had to do was follow a property TV program or go to a would be millionaire property seminar, then buy properties and somehow whatch them soar in value. Bingo, you joined in “the property game” and so did I!

Where are we now in 2011?

On thisismoney, in the beginning of August 2010, I remember reading: “Petrol price to hit £1.26p a litre by 2011″. Though I still wonder where did they get their forecast from (perhaps they have a secret little crystal ball), there forecast indeed was correct. This week I checked in my area and found out that the average litre of unleaded or diesel was around £1.30 a litre with the highest prices exceeding £1.40 a litre!

What’s oil got to do with UK property investment?

You may ask.
If you’re still a property investor or a landlord. if you’re considering become one because you’re brave enough to face risk and uncertainties, the question oil price has link with UK Property Investment and indeed elsewere.  Since our blog is focused on the dynamic of property in the UK, so let’s just explore that relationship oil-property for a moment.
Everyone and his kid’s sister property investor do not always pay attention to macro economical trends, currencies and commodities. This take more thinking than watching a TV program or attending a seminar; plus, you could get it wrong. Should you stop thinking? Obviously not, so let’s try.

First, if oil prices continue to go up and reach record highs, this will hurt all of us who are not filthy rich. The UK economy and indeed the world economy depend on much on oil, which means there will be direct consequences  on transport (for people) and (transported) food; two key elements of every household’s budget.

Second, with less money available in household’s budget, property actors (tenants, investors and landlords), all of us outside the filthy rich club will spend less toward maintaining, buying, investing in or renting properties. Therefore do not expect house prices to go up even if suddenly the banks decide to massively turn on the credit taps to boost the UK economy.  There won’t simply be enough cash in circulation to chase up the services that properties fullfil so not high house price inflation and actually other factors such as interest rates could even cause property prices dive deeper than 20% from what they are now. So sad?  
 

How far up for oil – how far down for property?

Our opinion is that crude oil may well exceed $200 barrel in the next 12 months if not before. But unless you are investing in oil, you really want to know how far property prices may go down.  Some say another %20, other another 40% and the optimistic even believe that we’ve reached the buttom. That’s all too confusing I agree.
I would like to say: “it doesn’t matter how far down or up property prices go”as long as you can sell it in pieces every month…

UK Property Lease Options Investing is the adequate cash flow investing strategy

Yes, we are bullish on moving from property capital investing to property cash flow investing. In time of recession, cash flow is even more king. If you can maintain a positve cash flow or enhance your position irrespective of the market price trend then who cares how far up, down or sideways?

Francis Emery

March 9, 2010

Wealth Creation Through The Right Exit Strategy

Filed under: General — Tags: , , , — sudeshnac @ 3:36 am

It is generally accepted, especially in the current property market conditions, that it is crucial to know your exit strategy before you buy a Property. “How will I make money with property?” This is the first thing many have in mind when they show their first interest in property investing. Rather than that, the first thing you need to start with is to determine, before you buy any investment property, how you plan to exit or sell the property.

A good question to ask oneself then is : -”What are possible exit strategies?” Well, these listed below are the tested and tried strategies most property investors have used so far:

1. Buy Investment Property and Hold
2. Buy investment property and have your tenant pay off the mortgage.
3. Buy Investment Property, Refurbish and Sell for Cash. You refurbish the property making cosmetic, mechanical and/or structural changes and sell for cash. Sometimes it’s called  ‘Buy-To-Sell’, or a ‘flip,’ if you hold it for a short length of time while making changes and then resell.
4. Buy Investment Property and Sell on a Lease Option. You then sell the property to your tenant/buyer using a lease option; they choose to exercise their option to purchase sometime in the future.

Of these, as the previous article in this blog demonstrated, Buy-to-Let options 1 or 2 were the favourites, and did appear to do so well, not so long ago! So why does this most common of exit strategies not work so well as before?

Well, think abut it this way…In recent years, the Buy-to-Let market in the UK has grown enormously, with the buy-and-hold strategy being the most popular. However, such has been the saturation level of Buy-To-Let in some areas resulting in an over-supply of investment properties and exposing investors with highly-geared portfolios to the inevitable fate of negative cashflow. Indeed, in the good times, capital growth was skyrocketing, rents were increasing for each tenancy renewal, and tenants were not always well treated. The landlord was definitely the king and property investing was so easy.

However, what happened when the market turned the other way? This is where every Buy-To-Let investor must ask himself/herself some very relevant questions such as:

Did you pay retail price when you bought your property?
 What happens if your property is empty for a couple of months?
 And your mortgage interest rates start rising again?
 And you are forced to accept a lower rent in order to tenant your property?

Remember, whatever the reason, you still have to come up with the money to maintain the mortgage payment each month! And worst still, what will you do if you have multiple properties where the above happens?  Despite how easy it all seemed in good times, do you know how to handle things when the market turns the other way? You could be forced to sell due to negative cashflow. In many instances you will lose money instead of breaking even or making a profit, as everyone bails out at the same time as you. You should never live or  believe in negative cashflow. It will give you stress, sleepless nights and fights with your partner. Such times will affect your health and that of your family’s too. This is why Positive Cash Flow Is a Must!

Therefore , exit strategy 3 and 4 are the best ones in the current market. Exit Option 4 using lease options is by far the most viable strategy for 2010 as we are all still very much in a period of  negative growth in the property market. It is interesting to see just how many so called ” traditional BTL or BMV” investors and poperty seminars are all turning to lease options as the saviour of the day! Therefore, it is imperative that every self-respecting property investor today owes it to himself to find out exactly what lease options is, and how to use it as an exit strategy. In the next article, you will learn more on this subject, but in the meantime, please check out the link below if you want to know more on lease options:

 http://www.ukpropertyladder.com/assured-positive-cashflow.

All for now.

Sudeshna Choudhury

 

February 8, 2010

From BMV to Lease Option Deals

Filed under: General — Tags: , , , , , — francis.emery @ 10:37 pm

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.

Grab Our Free Report: How To Make Good Money Shifting  From Below Market Value To Lease Options Deals

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May 11, 2009

Protected: UK Residential Lease Options Could Be The Royal Way To Sustainable Wealth Creation

Filed under: General — Tags: , , , , , , , — craigk @ 7:51 pm

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January 14, 2009

How To Convert Your Buy-To-Let Into A Cashflow Positive Lease Option

Filed under: General — Tags: , , , , , , , , — craigk @ 10:49 pm

It is about time that property investors learn once for all that cashfow investing prevails over capital growth investing.

Many novice landlords and property investors have been persuaded by property consultants, agents, finance brokers etc to pursue capital growth investing rather than cashflow investing.

In a raising market, this strategy makes sense but still bears a great risk, as the investor or the landlord must plan his exit strategy to sell before the downturn arrives.

What distinguishes sophisticated investors from the rest is that their investment strategy always focuses on cashflow first, then capital growth. But the novices have been conditioned to do the contrary, they invests primarily for capital growth, and not so much for cash flow.

This is often why the novice will take such a long time, if ever, to achieve the financial freedom that they wanted from property in the first place.

If your investment property (buy to let) is in negative equity or negative cash flow, do not despair! Even during this economic downturn you still can turn things around and achieve positive cashflow. You can convert your assured shorthold tenancy into a lease option (rent-to-buy or rent-to-own).

Following are the steps on how to do it.

Establish why you shouldn’t sale

If you selling your property in the current market means you have you have to find funds to repay your mortgage then do not sale! Try instead to understand how to get more cash from your property by impleting a lease option agreement.

Determin the five key lease that make a lease options agreement

If you choose the lease option road, you have to determine the five key elements previously discussed:

  1. Your sale price
  2. The upfront option fee (the down payment that reduces the purchase price)
  3. The monthly rent
  4. The instalment option fees (that can also reduces the purchase price)
  5. The option period

You can learn how to determine these five elements and engineer a win win transaction between you and your tenant-buyer. To find out more visit http://www.assuredpositivecashflow.com

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