We acquire most of our properties through Purchase Lease Option contracts or under Management Agreements.
We do source traditional purchases but we know how time costly this strategy can be so we prefer to work we the more highly leveraged and fast methods noted above.
Purchase Lease Option
A Purchase Lease Option is an arrangement, formalised under a contract, between an owner of a property and an investor / buyer and can be used in both the residential and commercial sector.
By seller and the buyer agree the main terms at the commencement of the contract…
The monthly fee
The length of the term
The purchase price
The buyer having the option to purchase the property for the agreed price at any time within the contract period.
Should the buyer not agree to purchase the property within, or at the end of, the contract period then the seller retains the property.
Purchase Lease Options are a very powerful way of portfolio building without needing to save for deposits and qualify for lending.
The two commercial elements of such a arrangement for the buyer being the monthly cashflow and the potential for equity gain during the option period.
Management Agreement (or R2R)
A much more simplistic arrangement to that of the Purchase Lease Option.
An owner and Investor / Operator / Manager enter into a contract whereby the Manager rents (or leases) the property for a given period of time for a given monthly fee / rent with an agreed schedule of responsibilities.
Care should be taken to ensure that when entering such an agreement full permissions are sought for the strategy that the property is intended for. For example if it is the intention of the renter to use the property for short term serviced accommodation then lender permissions should be sought along with Freeholder permissions.
A very easy strategy to use properties to scale a property business.
Exchanged Delayed Completion
A strategy similar to that of the Purchase Lease Option without the option element.
Seller and buyer exchange contracts in the traditional manner but Completion is delayed for an agreed period of time.
The major benefit of such a strategy being that it gives the buyer time to save for the deposit and obtain lending.
In effect a Purchase Lease Option but rather than the buyer typically being an investor, the buyer is the tenant with the option to buy.
A great way for people to get on the housing ladder who need time to save for a deposit and obtain lending.