THE END OF LEASE OPTIONS……..

Lease Options

THE END OF LEASE OPTIONS…….

Hey Whats up my name is Samuel Leeds and in this blog, I’m going to explain what happens with lease option agreement properties at the end of the term. Now, I hear a lot of people talking about lease option agreements. Maybe they’ve done my courses and they’ve taken only exception agreements. But not many people that I’ve spoken with have actually got to the end of the term of the lease option agreement, and they’d be able to experience that going through the challenges, going through the whole processes.

I have, because I’ve been doing lease option agreements now for over a decade. Is it over a decade, or is it exactly? I think it’s about 10 years. But let me let me let me talk you through how it works. So if you first if you don’t know what a lease option agreement is, I would suggest that you maybe watch this video or stop watching it and go watch another video and come back to on what a lease option agreement is.

But it’s effectively where you buy a house now and you agree to pay for it later and you have the option to buy it later and the idea is that you benefit from the monthly cash flow every single month. And at the end of the term and literally lease option agreements can be like five, 10 year terms at the end of the term, then you’re going to buy the property and you’re going to have it a really, really bargain price because of capital appreciation. If it hasn’t gone up in value and you don’t want to buy or you can’t afford to buy it, then you just simply don’t exercise your option.

lease options

You walk away and you just keep the cash flow that you made from the property over the years. So that’s why lease option is. However, what are some of the things you need to look for when you are doing a lease option agreement to avoid any problems at the end? 

So the first one is this. You need to make sure this is so important you to make sure that you have a solicitor represent the seller right at the beginning. Now, the reason that’s important is because it’s nothing to do with the contract.

You could just take my contracts and you could use it and you could do lease option agreements and just tweak it, use the template. The problem with doing that is that the seller at the end of the term, at the end of say seven-year term might say, you know what, I don’t want to sell the property to you after all. Now, why would they do that? Why would they change their mind? They’ll change their mind when the property doubles in value.

And they’re like, hmm, why do I want to sell to you for a hundred grand? When the property is now worth 150 or two hundred grand. At the time, in their situation, they didn’t care about the capital appreciation. They didn’t care about that. They just wanted to rent. But now, in hindsight. They’re thinking they want their cake and eat it. They want zero risk. They don’t want the house. But then when they see it goes up, they’re going to change their mind potentially.

And I’ve had this happen to me.

If you’ve had a solicitor represent the seller at the end of the term, if the seller says, I’ve changed my mind, they can’t say that because they knew what they were signing. They had a solicitor representing them, explaining them through it. They cannot tell the court.

lease options

Oh, well, Samuel or whoever pressured me or I did it under duress or I had no idea what I was signing. I didn’t know that I had to sell the property at the end of the term. They can’t say that because they’ve been represented by a solicitor. Now, you can have a solicitor yourself as well. Or you can represent yourself. But it’s imperative that you have a solicitor represent the seller. So that’s point one. That’s going to mean the end of the contract to the end of the term they can’t just walk away. And believe me, I’ve had them try, OK? I’ve seen it all, but they can’t. If you’ve had solicitor represent them. And of course, this list is also going to make sure the contract is properly drawn up and is air tight.

 

 

Number two, really important, at the end of the term, if you’re buying the property at the end of the term, how you are you going to afford to pay for the deposit.

 You might have heard me talk about lease option agreements as if they’re no money down. They kind of are no money down to begin with. You’re going to pay for this Lease deal. You’re going to pay a one-pound minimum option fee. So it’s kind of no money down. But what about the end of the term? You’re going to have to actually, when you come to wanting to get the title deeds, you’re gonna have to buy it then.

And the answer is you can’t finance it in such a way whereby it’s it’s no money down or you put money in and immediately get your money back. However, you’re going to need some form of payment to begin with to buy it. So how are you going to afford this? Well, you have luckily five years or seven years or however long the option term is to work this out. If you’ve got bad credit and that’s where you can’t buy houses, you’ve got seven years to get good credit.

lease options

And even if you’ve got really bad credit after I think it’s five years, it should be clean again. So you’ve got a long time to get your credit sorted. You’ve got a long time to save up your deposit. And you can literally use the cash flow from the property on the lease option agreement. You can use that monthly cash flow. Store it. And then later you can use that as a down payment on the property. Now, if the property isn’t cash flowing anything, give it to bad property in a bad area.

It’s not cash flow positive. Then don’t take it on in the first place. You’ve got to only take on properties even if it’s a free house or leased option agreement. There’s cash flowing at least two hundred pounds a month minimum. And if it’s a seven year, seven-year period. Believe me, two hundred pounds a month actually adds up to a reasonable size amount. So you’re going to save up that money.

Now, here’s another challenge at the end of lease option agreement term. That’s this. And this is something that not many people are aware of because they haven’t completed on lease option agreements at the end. I have. And lenders will not like the fact they won’t want to lend to you on a property that you’ve had previous interest in, because they’ll think it’s a great a conflict of interest and you’re gonna really struggle to get standard buy to let mortgage. So here’s what you’re going to do.

You are going to buy the lease option agreement. And of course, by the way, folks, of course, it has to be a good property. This is the strategy that I’ve used on several properties. It’s worked really well. So at the end of the seven years or however long it is, you’re going to make sure that you don’t change the carpets. You don’t change the kitchen. So at the end of the seven years is going to be better wear and tear. And you got to do that deliberately as part of your plan. You’re going to buy the property after seven years. You’re gonna buy it with bridging finance. So you gonna take a bridging loan and you’re going to buy the house. You’re gonna have to use some of your own money as well, which you’ve saved over the seven years, hopefully from the property itself, you are going to buy the property cash consisting of money that you’ve saved from the property and a bridging loan.

lease options

Bridging loans will often give you money for the refurb as well. So you’re going to buy the property, get the title deeds, and then you’re going to change the carpets, change the kitchen, tarty up a little bit. The tenants will be happy. You can maybe increase the rent a little bit too. Awesome. Then you’re going to re finance the house. You’re going to refinance the house now because the property’s been seven years. It should have gone up in value quite a bit.

And now you’ve just done a little refurb on the property. So you’ve pushed the value as high as you can get it. And then you’re going to immediately refinance on a seventy-five percent loan to value mortgage and you’re gonna pull out all the money.

So all that seven years, all that money that you’ve saved, you’re gonna get back that bridging loan, you’re going to pay it back and you’re gonna refinance the house and then you’re left with a genuine no money down property investment that you can continue renting out for the rest of your life that you secured by using a lease option agreement. But you did it properly.

So those are some of the things you need to look for. That’s what happens at the end of a lease option agreement if you found this blog helpful please do let me know in the comments.

Thank you so much. I’ll see you next time.


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