Understanding Electronic Signature Legality for Rent to Own Agreement in Australia

How to eSign a document: electronic signature legality for Rent to Own Agreement in Australia

hey what's up my name is samuel leeds and in this video i'm going to be talking about lease option agreements now this is quite a technical video around lease option agreements i'm going to be talking about some of the pitfalls and the things that you need to really watch out for so if you don't even know what a lease option agreement is and you're brand new to property investing and creative strategies where you can buy houses using very very little of your own money then i would suggest that you go and check out the what at least option agreement is video that i did i'll put a little card up where you can check it out i'll also leave that in the description but if you understand what they are you get the big picture of them and you're more interested in the legalities and the pitfalls then this video might be for you so there's a few pitfalls of lease option agreements and i'm going to give you the pitfall but then i'm also going to give you the solution you see some property trainers out there they'll try and put you off doing it because they just want all the good deals for them so they'll tell everybody else no no don't do it it's hard it's wrong it's this it's that but secretly they're succeeding or they'll tell you it doesn't work because it didn't work for them what i'm going to do is i'm going to tell you the pitfalls but i have successfully i'm just going to put it out there i have successfully built up a very large property portfolio multi multi-million pound property portfolio and i've successfully used lease option agreements to help me get there so it does work you can buy properties with very little money down and you can literally with as little as one pound transaction fee of course solicitor fees as well you can secure a lease option agreement benefiting from capital appreciation and also monthly cash flow so it's a really good way of buying properties without having to keep saving up money and putting down deposits but there are pitfalls i'm going to give you those right now and then i'm going to give you the solution to the pitfall but you have to be really careful so firstly if you like my youtube channel please do me a massive favor and smash the like button that's the first step to being successful in properties to smash the like button destroy it annihilate it and also drop a nice comment as well um just to you know give me motivation to keep going because i don't even i don't think there's any ads on this channel by the way so i do this just really to help people so drop a comment if you're grateful for the video subscribe turn the notification bell on really important do it right now so first problem is with lease option agreements if you're taking on somebody's house with the view to renting it out you're taking over their mortgage with the view to renting it out what happens if the current mortgage doesn't permit you or isn't the correct type of mortgage to rent the property out let's say it's a residential mortgage so you secure a lease option agreement and you say hey i'll buy your house now but i'll pay for it in seven years time and in the meantime i'll take over the mortgage so you take over this property but it's on a residential mortgage so how can you rent it out without committing mortgage fraud that's a pitfall the answer to that and the solution to that and sometimes it could scoffer a deal if there is a mortgage on the property that restricts you from renting the property out that could scrapper the deal but the solution is is firstly you've got to check to see if there are any restrictions and if there are you're going to have to ask the lender or ask the owner to ask the lender to get consent to rent the property out now in my experience what you'll find is i mean lease option agreements will tend to be properties that either are in negative equity or they might not even have a mortgage on them or they might be tired landlords that have already got the right to rent it out but if it's a residential property the reason that they'll be happy to sell you the propaganda lease option agreement is because they're in negative equity if they're in negative equity just bear with me a second that means that they bought the property high it's dropped down low the mortgage lender is probably feeling pretty uncomfortable right now because the value of their house is lower than the mortgage that's a problem for a lender so most lenders will give consent to that property to that owner for the owner to rent it out as long as they're getting their monthly mortgage payments so i would just say ask the lender for consent tell the lender look this property is negative equity by the change of circumstances i want to move out please could you give me consent to rent the property out and usually they will do that so that's the solution around the problem so get permission before you rent the property out if there's a restriction on the property at all second pitfall of lease option agreements are and i've heard people say this they say the types of properties that are done on lease option agreements tend to be very cheap properties in shabby areas with bad tenants rough neighborhoods that's why the owner is wanting to get rid of the property in the first place i think that's kind of a little bit of a weak pitfall if i'm perfectly honest because of course when you're doing any property transaction whether you're doing it on a rent to rent at least purchase lease option agreement whether it's a hmo or buy to let whatever it is a flip even you're gonna have to do your due diligence on the area and make sure that the property is gonna be cash flowing positive so if it's in a cheap area that means that probably the mortgage payments or the monthly payments are going to be cheap as well so that means that the expenses are low which means that the profit margins are likely to be higher so you just need to make sure you you're pr profiting you've got a positive monthly cash flow of at least 200 pounds per month before you take on any property even if it's a free house just because it's a free house doesn't mean it's a good house i think some of my students have done the lease option training and then they've been like oh my gosh i'm i'm desperate to just go and secure a lease option agreement now and they'll they'll go and get a deal and they'll sign it and they're so excited but yes technically it's a it's like a free house you're putting down a pound but it's a terrible house you're going to be losing 100 a month on it so always make sure the property is not in a terrible area it's going to attract terrible people and also it's going to be cash flowing 200 pounds a month okay next pitfall this is a real big one and most people don't know about this because again not be i'm not mean to like um be disrespectful to people that teach at least option agreements um a lot of people go on my course do some training maybe at best secure one lease option agreement and then start teaching it and it's like no like to teach something you have to have done it for years i didn't start teaching until i was financially independent in property and i've done it for years before i started teaching i've been in proper town for 12 years but with lease option agreements the reason it's so dangerous to teach it when you've not actually experienced it properly not just secure a lease option agreement but seen it out till the very end of the contract because this let's say you agree to buy a property on a lease option agreement and you say look but i'll buy it now i'll take it on now i'll control it now but i'll pay you in five years time at the end of the five years when you go to buy the property most mortgage lenders in fact i think just about all mortgage lenders will be unhappy when you apply for a mortgage to buy the house unless you're buying it cash but realistically are you going to have the cash i mean you might have saved up monthly and you might have a deposit ready but you're probably going to want to buy the property and you're probably going to want to buy it with a mortgage at the end of the term you actually go to buy it so you've saved up your deposit maybe you've saved it up from the property you apply for a mortgage but if the lender knows that you have had a previous interest in that property which you have because you're probably going to have registered a restriction on the title deeds on land registry so that the owner can't sell the property anyway so you're probably going to get declined a mortgage at the end of the term because they're going to say no you've already got a financial interest in this property therefore makes us uneasy and we're not going to lend you the money to buy this property now you might say why would they do that though what's the problem don't sign up for that why class it is what it is what's the solution so that's a major pitfall that most people aren't aware of that do lease option agreements even people that teach lease option agreements i'm like they don't even know this so i have successfully completed lease option agreements right to the bitter end okay many times and what you do there's a couple of options option number one is you buy the and this doesn't this isn't completely foolproof but this usually will work number one is you buy the property at the end of the seven years but you buy it in a company so you set up a company you call it purple rain limited whatever you want to call it and then purple rain limited which is your company buys the property at the end of the term now the lender won't be so worried then because it's not you buying the property it's the company buying the property and the company hasn't had an interest in the property but you have now the only potential issue with that is if the owner refuses to send it to the company because they say that you had the contract with them and they don't want to sell it to purple round it's rare that'll happen but it could happen so that's option number one there is a second option which i have also done option number two which is to buy the property but buy it on a bridging loan so you're going to put down your deposit that you've saved hopefully you've saved it as a result of the cash flow from that property over the five years or however many years you're going to use that money and you're going to buy it on a bridging loan now bridging loans are obviously a bit risky because they're expensive you're going to pay maybe one percent a month but what you're going to do is you're going to you're going to buy on a bridging line you're then going to also maybe borrow some money or use your own money to refurbish the property because chances are after five years of owning a property it's probably going to need a little bit of a refurb so you're going to change the carpets you're going to fix it up and then you're going to refinance the property but after you've bought it so that's another option which will totally get around the problem so there are pitfalls to lease option agreements and it does involve work but there's always solutions when you know how so i hope you found this video helpful i am going to be running a lease option webinar which is going to be a live webinar where i'm going to be teaching through how to find lease option agreements how to secure them how to speak to the seller and explain in such a way where you can secure properties which is a remarkable way to buy a property and it's much better than saving a deposit so i'll leave in the description i'll leave the link to that webinar it's completely free so i hope to see you there and again smash the like button if you enjoyed the video if you want to know what a lease option agreement is in the first place and this video completely confused you then i'd suggest you check out this video right here which goes through the basics of lease option agreements also if you want to see a video i did with ian patterson one of my students who actually built up a very large portfolio of lease option agreements which proves that they do work and they are profitable because he left his corporate job check it out right here subscribe check the videos out i'll see you next time thanks