eSignature Licitness for Rent to Own Agreement in United Kingdom

How to eSign a document: e-signature licitness for Rent to Own Agreement in United Kingdom

so it's all very well and good learning this stuff in theory but how about the practical implementation in today's video i'm going to be breaking down another real deal this is one of my portfolio that you can look at and learn from the experience [Music] so i'm going to do this video with a bit of screen sharing here as well just so i can give a bit of an overview of the deal so you can actually see now this deal is a north east deal in england it's a lease option so before we jump into the deal let me just remind you of what a lease option is a lease option really is split into two parts the lease and the option so the least part is taking control of the property and agreeing with the landlord the owner of the property that you are able to lease out the property on their behalf and benefit from the finance and the option is the right but not the obligation to purchase the property on or before the completion day now i know that can be confusing but essentially you are securing the property at a price agreed today and you get to buy it at any point in the future up until the agreed term so for example i agreed to buy your property for a hundred thousand pounds within the next five years that is called the consideration the lease and the option now just so you've got an idea of the process of this the owner of the property sits on one side you then put the contract in place to gain control of the property and you make money so the way to take control you can rent it out you can refurbish it you can service accommodation it hmo tenant buyer get planning on it do whatever you want as if you owned the property now of course you do need to get signed off by the owner which is previously agreed the option part is it allows you to sell the property so once you've got an option you don't actually need to buy it it's called assignability so because of the contract is you can assign it to another person let's say within five years the hundred grand property is worth a hundred and twenty thousand you might buy it from a hundred own it because it's worth more etc or you might go actually i don't want to own the property so i'm going to sell it for 120 000 even though you don't own it then what happens is 100 000 goes to the owner of the property and you get 20 000 pounds but you can also buy it or you can do an option uh option it on i.e somebody else can take on the power of the lease option moving forward with that brief understanding in place let's look at a real deal so this is scarborough road it's in the northeast and this is a property that we end up taking on directly from an existing landlord we end up putting on a lease option of seven years on this property which gives us the right but not the obligation to purchase this property at an agreed price within that seven year time frame we actually agreed to buy this property for 35 500 pounds now you might be thinking that is ridiculously cheap and that's because it is but it comes with some drawbacks in this particular area if you've been in property long enough you know that anything with a purchase price below like 60 65 000 you're really going to struggle to get a mortgage on that and so if i needed to purchase a 35 500 i'm really gonna have a problem with the mortgageability of that so i'd end up having to purchase cash i spent seven grand on refurbishing the property so have a look at these photos this is what it looked like before and what will baffle you in property especially with people that are selling off as a lease option is the quality of the property really is low so this actually was tenanted and it's pretty grim as you can see from the photos it's dingy but lived in and so what we end up doing is getting well the tenant was out we spent seven thousand pounds just giving it a fresh enough and being able to get it into a tenantable standard that we can be proud of and you know i really think that when you're building your portfolio you want to have pride in what you're doing the hope is that spending this seven thousand pound on the refurbishment it will allow the property value to increase the next best property on the street in that current condition was sold for 50 000 pounds in march 2021 so it gives you an idea of a decent property and what it's going to end up going for we're not renting this property for 395 pounds the problem with this area is well there's actually a few different angles first of all it's selective licensing what that means is in a particular area where the properties just are not run to the best standards so the council steps in to make sure that people are doing landlords in particular are doing the right thing by their tenants it's also a bit of a rough area if i'm completely honest now it's a little bit rough it means that the tenant type in the area maybe isn't the most desirable and so by renting to a charity it really allowed us to de-risk the position so yes they're only paying 395 pounds but i don't need a management company in place and it's a five-year fri lease if you don't know what an fri lease is it's a full repairing and insuring lease it's more common in offices when you rent an office for three years five years you do a fri lease what it means is that no matter what condition the charity or the house ends up with in in the next five years the charity will pay to put it back to the original standard so it gives me some confidence and protection and it's also nice knowing that we're doing something decent for the local community and of course the charity the mortgage on this is a whopping 65 pounds and 93 pence i know it's kind of ridiculous isn't it that is an expensive phone bill i would say on a monthly basis and it's like you can own a property for 65 quid a month yes you can that is what the mortgage costs on this property so we're making a gross profit of 329 ends up netting down to about uh 200 pounds a month but the gross rental profit over the six and a half years which is from when we got the tenant in is 25 000 pounds plus 10 000 pound equity the hope is by the time that it gets to the end of that six and a half years you'll go into it we're going to end up with a property worth around 70 000 pounds which means we'll be able to purchase the property more than likely i've actually recalibrated my strategy so being open with you guys it's really i'm probably going to offload this property it's gonna it's great investment it's a cash cow for the right person it's just actually i'm really localizing and re-looking at my property portfolio going for more expensive properties now which you probably see me going to on the property so in theory in today's money is 35 662 pounds profit that i'm going to be making from this property and considering i put in a pound to secure the property on lease option and 7 000 investment i don't think that's too bad overall so really this is making money in three ways number one added value okay even though i don't own the property i control it and so any increase in value i'm able to capture in the lease option because of the assignability of the contract number two is the rental income getting the rental income from the tenants in this case a charity that guarantees it under an fri lease the full repairing and insuring lease and of course rental growth as supply and demand changes over time what happens is the supply is really restricted in those areas because a lot of people are not buying to rent out more because the buildings just don't allow for the value so because of this increase in demand what that causes is an increase in rents over time and what we need to remember is that increase in rents is actually pure profit so of course there are other costs to take account of when you're looking into this now voids maintenance and management are the ones that get left out repeatedly but because of getting the charity in place it's not something i need to worry about because it's guaranteed rent guaranteed maintenance and there's zero management costs and so the profitability of this particular lease option just is really quite magical in the fact that we're putting minimum money in around seven up or seven thousand and one pounds um and getting 35 grand back minimum over the next six and a half years or what i think of with the increased equity is actually going to be 55 000 pounds which by anyone's account is a phenomenal return on investment so you might say well jamie why are you going to end up getting rid of this property at the end because it doesn't align with my investment strategy and i think having a core strategy moving forward is really important that's it for today i really wanted to give an overview of a lease option and a real deal of how you can implement this but this is a new section of the youtube channel where i'm really trying to introduce deals that i've done i guess number one for credibility but number two to show you guys that this is actionable and you need to be going out there and getting your own real deals let me know what you thought of the video in the comments if there's any other angle you want me to come from in these videos ultimately i'm making the video for you and of course i really love to hear have you done a lease option what's your experience of it let me know in the comments if you've got value in particular make sure to destroy the like button and if you're new to the channel make sure to lightly tap the subscribe button and the notification bell and i'll see you in the next video