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
