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Article > The Seven Essential Elements of Option Agreements

Learn Lease Options Live!

 

Article kindly supplied by

Mark Jackson

 

www.leaseoptioneducation.co.uk

 

Options are versatile and powerful legal instruments which are changing the way residential property is bought, held and sold in the UK.

Put simply, options are written agreements that give the holder choice or freedom. Depending on the wording in the document, the owner gives exclusive freedom to buy, use or sell the property, or a combination of these freedoms. If the buyer chooses to buy whilst the option is in place, the seller must sell.

That is the essence of an option!

 


Lease options are powerful tools, and to harness their magic we need a basic understanding of what they are and how they can work for us. It is important to have an idea of the essential elements needed to make options work:

The Seven Essential Elements of Option Agreements

1) A willing seller
2) Property or land – the asset
3) A written agreement granting privileges
4) A consideration or option fee
5) An agreed purchase price
6) A time frame or term
7) A willing buyer

Let’s look at each in a little more detail.

1. A willing seller
So the seller must understand what they are doing, which means you must have explained it to them. One objection Wendy and I often get from investors starting out with options is “Why would any seller agree to this?” There are many reasons why sellers agree to grant terms and agree to your option offer, and we will discuss that in a later post.

2. Property or land – the asset
It goes without saying that there has to be something of value, something desirable, for an option to work. Be sure to do your due diligence and get necessary checks done before agreeing to any property or land option to ensure it has real value. One investor almost paid £5,000 for an option on a property the seller was claiming to own, but didn’t really!

3. A written agreement granting privileges
A written agreement is vital, not just verbal. Lease options are all about time and terms and time tends to change things so you need to make sure that things are clear from the start. It is important to protect your interests and that is why when agreeing lease options, everything should be down in plain English.

4. A consideration or option fee
This is what makes your written agreement legally binding, think of it as the stamp on your postcard. The option fee (or consideration) doesn’t need to break the bank, but it does need to be paid. It’s interesting that there is no minimum, but the consideration must be recognised in the UK as something of tangible value.

5 An agreed purchase price
The price you will eventually pay for the property needs to be clear and understood by all parties.

6. A time frame or term
According to English law, the maximum allowable term for an option is currently 21 years.

7. A willing buyer
This may be you if you find your dream house and decide to buy it using a lease option. It may be a tenant buyer you are working with. In any event, the buyer must understand and keep to the terms of the agreement – or the privilege to buy at an agreed price at a future date will be lost.

 

If you want to learn more about Lease Options and how they can help you on your path to financial freedom, get yourself along to the best training in the industry.

14th-15th May 2011 - Two day Learn Lease Options Live! Heathrow London

 

Using Lease Options Case Study:

The Situation: Two brothers own an empty modern 2 bed house with no debt; 6 months marketing at £85,000 found no buyer. Unwilling to become landlords and struggling to pay the mortgage on their new home, they needed a quick fix.

The Want: Clear the mortgage on the new home

The Need: Monthly money to cover the mortgage on their new
home

The Solution: A 48 month Instalment Purchase Option (£67,000) with permission to let

Commentary: I pay them £280 pcm and let the house for £650 pcm. I will buy within the term and hold. There are many houses out there mortgage free, which seem to the owner to be a liability!


We at MPPT, were fortunate enough to catch up with Wendy Patton and Mark Jackson. We asked Wendy & Mark a multitude of questions including...exactly how lease options worked in practice, if there were differences between how they were used in the UK and if things were different in the USA and most importantly we asked if investors could make money using options and more...
 

 

If you want to learn more about Lease Options and how they can help you on your path to financial freedom, get yourself along to the best training in the industry.

14th-15th May 2011 - Two day Learn Lease Options Live! Heathrow London

Imagine seeing £3,997 drop into your bank account in the next 29 days? Would that make a difference to you? Is it possible? Yes! So you know that Property Lease Options are revolutionising the way skilled investors are buying and selling property in the UK? And you’ve heard of Lease Options?

Lease Options, often called property options or property lease options, Rent to Buy – or Rent to Own and similar property investment strategies are surging in popularity. Why? Because they are so powerful. They leave conventional property investing methods stunned and standing.

Property Lease Options Give You Freedom! At our May Two Day Investor Seminar – Learn Lease Options Live – You’ll learn:

1.How to create a four figure monthly income from property you don’t even own
2.How to sell property which is in negative equity – for a profit
3.How to create multiple streams of income using none of your own money!
4.How to drop more than £3,997 into Your bank account in the next 29 days…

We personally do deals time and again using lease options, and so do those who use the strategies we teach… Join us and let us teach you!

 

 

 

 

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