Lease Options and Let to Buy in Property by Letting Focus

As ‘No Money Down’ financing for buy-to-let investors has virtually been pretty well ended by the UK’s mortgage lenders (when they finally wised up to how much they personally had to lose in such transactions), so other ways for property investors wanting to make money out of property with less than full financial commitment are being marketed.
One of the latest “kids on the block” is so called Lease Option Property Schemes or Let to Buy or Rent to Buy Schemes.

LEASE OPTION PROPERTY SCHEMES
How it works is like this.
I, as a property investor, set up "a lease option scheme" with a tenant in which the tenant gets to move in and buys option to buy the property from me, say 12 months hence.
Why would I do this, you ask?
Well, the idea is that the tenant turned possible buyer will pay the investor not just the rent under a tenancy agreement but also a premium for a separate option contract under which the tenant can (provided always that he meets all rent payments) exercise the option to buy the property at some future set date or dates.
They should also have an incentive to look after the property better - being as they will eventually own it.
The advantage to the tenant is he gets to fix the house price now (and so before property prices race away completely out of his reach.)
The advantage to the investor is that I get more money from the tenant – because I get a Lease Premium on top of the normal rent.
The advantage to any marketer of such a scheme is that he gets to teach me how to do it and no doubt also a cut from the legal fees associated with setting up one of these fairly complex schemes.

DEFAULT RISK
But what would happen if I, as owner default on my mortgage payments to my lender?
Does the tenant - buyer’s option also lapse? Where would that leave him?
I wondered what the Council of Mortgage Lender’s (CML) advice on this would be as it seems quite a people are interested in these kind of schemes now.
And sure enough they did have a view.
They said, and I quote, “(Our) understanding is they are two separate agreements. First there is the mortgage between the landlord and the lender – if the landlord defaults, they may be subject to possession proceedings, and if the property is taken into possession it will be sold to recover the debt. The second agreement between the landlord and then tenant will be secondary to this. The lender has first charge on the property.”

NO SECURITY
So there we are, straight from the CML’s mouth as it were.
What the CML are saying is that “the tenant turned possible buyer” has no REAL security at all where the owner has a mortgage and defaults.
Maybe I missed something very obvious which means these schemes can work.
I'm assured by a few people in the industry whose opinion I respect that they can work if they are set up right.
I hope so or in about 5 years the press may cotton on to the story that lots of tenants have lost out under lease option contracts that have been set up wrong or unfairly.
I predict that in 8 years time the FSA will end up banning Rent to Buy and Lease Options as they have already effectively banned some of the old practices in Sale And Rent Back.

NO TAKERS
With house prices going up more slowly now I cannot see too many takers for these schemes among the tenant population, right now.
However, I can see the attraction (to the tenant / would be buyer) when house prices are rising fast.
But right now it seems a bit of a stretch to tie yourself to a specific property and a lease option with a private owner (which has no security anyway and which appears to be subordinated to the mortgage) when you can instead just rent and have more freedom and the flexibility to buy a property when and where you want - and when you are ready to do so.
If you are a tenant and you are interested in doing such a deal with a private landlord you should check what happens to your Lease Option to Buy if the landlord were to default on his mortgage.
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At LettingFocus we offer independent unbiased seminars for buy to let investors and landlords as well as one to one advice covering all aspects of being a landlord and investing in property.
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Why I like houses more than flats by Lawrenson of LettingFocus.com

Ah, us British and Irish we just love those lovely Victorian and early Edwardian houses don’t we.
We love them so much so that we are happy to chop them up into “conversions” and make little flats out of them.
Our love affair for the converted flat can be seen in the fact that many people are prepared to pay as much if not more for a two bed converted Victorian flat than they would for an equivalent two bedroom ex local authority freehold house with a garden on a nice estate in a similar area.
As a property investing landlord who has owned both types of property, I’m not convinced by these Victorian conversions.
In the long run, properties that are freehold and have gardens will always keep their price – just as long as they are in decent areas.
If I had to choose between a converted Victoriana flat with no garden and a freehold two bed modern house with a garden I would always tend to go for the house.
Why?

CONVERSIONS CAN BE A PAIN IN THE NECK
Well, it’s more than just money, it’s time too.
You see, if you have a problem with a flat, you may also get problems with neighbours too. Think leaks and how leaks tend to damage anywhere below where the leak occurs and you’ll know here I am coming from.
Often, conversions also seem to have poor plumbing and heating systems – another consequence of the fact that they were not built to be separate dwellings.
Think about noise and inconsiderate neighbours. In converted flats, noise is always a real problem because the properties were never built to be soundproofed in the first place.
And too many converted flats have problem leases too which make it really hard to get a freeholder to do anything, like fix the building.
Recently I looked after a property for some friends who had gone overseas.
What a nightmare! I constantly had noise issues, leaks, endless plumbing issues and antisocial neghbours to deal with.
A good pal of mine in the trade, who I can’t name, has a business where he helps people extend leases and buy freeholds. He knows how hard it is to enforce your rights as a leaseholder or get agreement on a shared freehold and he says he would never buy a flat. He should know!
If I really had to buy a converted leasehold flat, I would only buy where there was just one other leaseholder in the block – and even then I would want to see a rental yield at least 2% higher than on an equivalent freehold to make up for all the extra work involved.

BELOW MARKET VALUE SHOW GOES ON
At our recent networking event Simon Taylor, the founder of GetAnOffer.co.uk told us that serious buyers with cash or access to lending are still using the downturn to their advantage to buy below market value properties.
Simon has accepted that with legislation imminent, the party is over as far as Sale and Rent Back is concerned but is still confident that on his site where sellers pay to advertise their properties below market value deals can still be had.
His site has some interesting features and is worth checking out.

INFLATION NOT DOWN MUCH – SHOCK HORROR
I see that the commentators were a bit surprised that the latest inflation numbers were not as low as expected. Goodness gracious, where did they study economics.
I would have thought it pretty obvious that with the pound so low, the impact of “imported inflation” for anything made abroad (which these days is pretty well most things) was always going to be pretty significant.
The scribes were also surpised that yesterday’s mortgage numbers were the highest since way back in the autumn.
More proof that the doomsayers who forecast further huge falls in the price of property will be proved wrong.

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ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - the property letting experts. Read Articles for Landlords.
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The new edition is for accidental and experienced landlords and is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on sale and rent back.
I’m an expert property writer and property speaker - and I run the well known landlords blog that you are reading now.
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general property letting advice and consulting to anyone looking to buy property for themselves or to let out. I can help private individuals with any aspect of buying property or buy to let.
What’s unique about lettingfocus.com is that we are independent property investment advisors because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from these sources.
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Copyright: David Lawrenson 2009. This blog is updated roughly once a week.
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Sale and Rent Back in the Dock says Lawrenson of LettingFocus.com. Also, Local Housing Allowance and Rents.

I see that the OFT has asked eight firms in the, er, Sale and Rent Back “industry” to come to see them for coffee and biscuits and while they are there, try to justify the advertising claims they made to try to get hapless home owners to sell them their property at knock down prices.
Of course, this is all part of an overdue investigation into that industry which is now ongoing.
I’d like to have been at that meeting to see some of the less straight of these firms struggle to explain the quite outrageous advertising claims they had been making in the past.
Another meeting I’d like to be at is the one today where Sir Fred Goodwin of RBS and his pals try to explain how they just about destroyed a bank and helped b****r up the UK economy in the process.
I trust they will entering the building by the back door and well away from angry protestors.

WHY ARE RENTS FALLING?
Lots of people (well five this week actually) keep asking me why rents are falling and how much longer and further they have to fall.
Well, there are various reasons for the fall in rents.
First, there is a lot more property about which is available for rent.
Many would be house sellers cannot bear to take 15 or 20% less on their property than they would have got 18 months ago and so they opt to rent the house out instead.
With lots of stock about tenants can be choosy. In London and the South East, which have seen the local economy hit hardest due to the large number of financial services firms, rents are down about 10% on last year overall.
Second, as many landlords’ mortgage payments have fallen in line with the falls in the base rate, they can afford to cut the rents a bit.
Some people think rents will keep falling slowly as long as this situation persists.
But I am not so sure because there are a few things that will underpin rents.
First of all, at the lower end of the market, the Local Housing Allowance (LHA) rent levels provide a sort of buffer below which private rents will not fall much. OK, I know LHA is supposed to reflect private rents but the process by which the government adjusts them is slow. Think of the big Afghan family in the large house in Hampstead that recently made the news as a good example of this!
Second, mortgage lending is only going to unfreeze very slowly. Heck those bankers have still got bonuses to pay so they need to keep up both high mortgage margins over base rate and high product fees for quite a while.
Add in all the doom and gloom in the news plus the fear over jobs and I think we can see a scenario in which an increasing number of would-be first time buyers will opt to be tenants for some time yet.
And with this increased demand for renting, rents will not fall too far.
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ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - the landlord and property letting advice experts. Read More Articles on Property by David Lawrenson.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property book - Buy Successful Property Letting - How to Make Money in Buy to Let.
The new edition is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on sale and rent back.
I’m an expert freelance property writer and property speaker - and I run the well known property investment blog that you are reading now.
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general property letting advice for a fee to anyone looking to buy property for themselves or to let out. I can help private individuals with any aspect of buying property or buy to let.
What’s unique about lettingfocus.com is that we are independent property investment advisors because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from these sources.
We simply give one to one unbiased advice and are often asked to evaluate other property investments.
In my corporate consulting role I also advise banks, building societies, housing associations and web portals with their buy to let and property products and services.
You can read more of my blog & find details of my networking, advice and property training programme at my website.Copyright: David Lawrenson 2009. This blog is updated once a week.
WANT TO BE KEPT UPDATED WITH OUR LATEST BLOGS?
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You then just copy the link that comes up into your News Reader or News Aggregator. Even a non techie like me managed to do all this.
Please note if you have a website & are thinking of reproducing material here - that’s fine but we DO require the full links shown in each blog to be included, including also the links in this section. The full article including all links must be available to ALL VIEWERS of your site and not restricted to members.

OFT weeds out rogues in Sale and Rent Back Market - by Letting Focus

I’ve just been up to Soho to do a podcast for the Motley Fool website at http://www.fool.co.uk/ where I was interviewed by David Kuo who in real life is as entertaining as he appears in the wee early hours on BBC Breakfast.
Ahead of these podcasts, the guys at Fool invite readers of their site to put questions to the “podcastee.” For example, “Isn’t buy-to-let dead? Why are you still flogging a dead horse? Aren’t landlords horrible people who should be shot at dawn?"
These were just some of the questions that we dealt with on the podcast. (Actually, I made up the one about landlords being shot at dawn). Look out for the podcast here soon.

BUY TO LET IS ALIVE AND KICKING
Well, buy to let is very much alive and kicking as you will see if you read the other posts at this blog.
However, it has undoubtedly got a lot harder for the new entrant landlord today.
Typically, right now you will need at least 25% deposit to put down in order to get a buy to let mortgage. And you can expect to pay anywhere from a 1.5 to 3% fee to the mortgage lender as a fee too.
And we will be stuck with these high entry costs for as long as the credit crunch is with us.
Sure, there are some clever financing techniques you can use to cut the amount of your own cash you need to put in – sometimes to nil - but many of these schemes have proved to be made of sand.
For example, there will be many landlords now ruing the day they bought a shiny new build flat off plan in one of the city centres only to find that despite the clever financing techniques that allowed them to acquire the place with none (or very little) of their own money down, they had actually massively overpaid for a property that is now proving very hard to let out because few tenants want to live in that kind of property.
For a long time it has been my view that the activities of the property companies that marketed these schemes to novice investors need to be regulated.
This should be looked at urgently as it is clear that some people have lost large sums of money. Sure, some of these investors were greedy and yes, many were naïve too. And if you were very uncharitable you may think, “Well, they got what they deserved.”
But even if you are a non landlord you ought to be concerned that the activities of the companies that marketed many of these worthless flats led to many of our inner cities being clogged up with the kind of property that as a country we don’t actually want.
And as the effects of the lack of housebuilding today translates into an even worse shortage in two years time that ought to be something that bothers all of us.

SALE AND RENT BACK
Talking of regulation, the Office of Fair Trading (OFT) has just called for tighter controls of Sale and Rent back
So far, there has been no regulation of these schemes where firms buy homes from cash strapped owners at a big discount and then allow them to continue living in the property as tenants.
The OFT has found that customers of these schemes, many of them highly stressed and facing imminent repossession, were sometimes misled over the value of their homes and in some cases were told that they could stay in their home for years whereas in reality the tenancy was only guaranteed for 6 or 12 months.
The OFT has recommended that there should be more clarity about the initial valuation, sale price, terms of tenancy and amount of rent to be paid. They also say that Sale and Rent Back firms should tell people about free independent advice available to them before they decide to sell.
I completely agree with these recommendations and any decent operator in the Sale and Rent Back market should too.

SMALL PRIVATE RENTED SECTOR
The UK still has a small private rented sector – only about 10% of all homes are privately rented today. This is very small by current European standards and is low compared to the UK’s 50% post war level.
Independent surveys continue to show that increasing numbers of people prefer to rent property even if they could afford to buy - and for these reasons alone we DO need a really well regulated private rented sector.
I would say that most new regulations that landlords have had to face over the last few years have been for the greater good of society (though The Licensing of Houses in Multi Occupancy or HMOs
could be improved) and the tenancy deposit schemes are still too clunky.
The new recommendations for Sale and Rent Back are a welcome addition, will make for good regulation and will make fewer people say that landlords should be shot at dawn.
ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
I’m David Lawrenson of LettingFocus.com - landlord experts.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property title - Buy Successful Property Letting - How to Make Money in Buy to Let.
The new edition is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on sale and rent back.
I’m an expert freelance property journalist, property speaker and a well known buy to let blogger
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general property education, training & advice for anyone looking to buy property for themselves or to let out.
In my work as a consultant I help private individuals with any aspect of buying property or buy to let. What’s unique about lettingfocus.com is that we are independent property mentors because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.
We simply give one to one unbiased advice and are often asked to evaluate other property investments.
In my corporate consulting role, I also advise banks, building societies, housing associations and web portals with their buy to let and property products and services.
You can read more of my blog & find details of my networking, advice and property training programme at my website.Copyright: David Lawrenson 2008. This blog is updated once a week. WANT TO BE KEPT UPDATED WITH OUR LATEST BLOGS?
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Sale and rent back operators question need for regulation says Lawrenson at LettingFocus.com

Following on from yesterday’s lettingfocus.com blog calling for the need for more regulation of sale and leaseback, I thought I should just balance out the debate by putting the view of one landlord who contacted me.
So here goes. And thanks to Mr. P for this one.
“Buy and rent back regulation. Hmm are people that daft that they need protection from their own stupidity. I would agree that some of the promises are ludicrous, but if there was not a market for this kind of deal then it would not happen
This week I agreed with two other landlords to do exactly this, the first adverts go in the paper this weekend, with the idea of putting portfolios of 5-10 properties and then selling the portfolio on. We have contacts who supposedly want to buy them, but time will tell
The scenario is the same as those put to us through mortgage advisors/estate agents when someone is facing repossession. If someone has spent more than they can afford they need someone to dig them out of the mess of their on making.
They can always turn down our offer, but I suspect they need the money quickly to stave off repossession/bankruptcy proceedings.
I had one last week, he is in debt to the tune of 120K, all secured against a property worth max 90K (if perfect, which it wasn’t), and was 7 days away from repossession and bankruptcy court hearing. However he and his family went on a nice cruise recently - so I guess it is obvious where his priorities lay.
However he turned down our offer (of 10%ish below true price), but I suspect now has nowhere to live and will be phoning our rental adverts, but with his record of not paying his interest only mortgage of £500, what makes us think he will pay rent of the same amount.
Or am I being too hard nosed on poor unfortunate people who obviously are not responsible for their own lives &r the mess they make of them.”
At lettingfocus.com, I have some sympathy with that position.

Our View at LettingFocus
Looking at it this way, by selling to a landlord and becoming a tenant, the vendor turned tenant cuts out some costs - he saves on estate agency fees and also HIPs (because as the property is not marketed it should not need one) and he gets to stay in his own home too (at least for a time) Maybe at the bottom line, what’s really needed is for the government to provide some sound financial education for people as part of the core curriculum at school, so they would not make a mess of things in such ways.
If you need more advice on buying property below market value or buy to let investment in general please ask me. I’m David Lawrenson from property investment advisors http://www.lettingfocus.com/
I’m the author of the buy to let book “Successful Property Letting - How to Make Money in Buy to Let” the UK’s top selling property title.
I’m an expert on property investing for profit and a well known property freelance writer and I contribute to newspapers and a host of property websites, write a property investment blog and run a landlords advice service.
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services.
You can read more of my property investment blog and details of my networking, advice, property networking programme at my website http://www.lettingfocus.com/My next London landlords networking meeting is coming soon.
Click here for details: Property Investment Advice
What’s unique about lettingfocus.com is that we offer independent property mentoring because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson. This blog is updated at least twice a week. Permission must be sought before using the material in the blog.

Sales and Rent Back Regulation Needed says LettingFocus

I read that The Property Buyers Association (PROBAS) has just been launched with a code of conduct for Sale-and-Rentback - and aims to gain eventual approval from the Office of Fair Trading (OFT) and the Financial Services Authority (FSA), the Government's City watchdog.
But so far PROBAS currently contains just three members and the danger is that unscrupulous operators muscle in.
Many of the companies who do sales and rent back say they can complete a house purchase within days, although the selling period is usually quite a bit longer in practice.
At present, the business of buying houses from people in mortgage difficulties is completely unregulated and there are lots of one man bands in the sector, learning the tricks of the trade from seminar givers at the trade shows – who often make a lot of their money by providing the would-be investors with bridging loan finance so they can seal up good property deals fast.
The fact that PROBAS now exists is good. It’s just a shame it is so late in the day.

One Sided SARB Deals
Whilst the business is unregulated lots of hapless people in debt will become tenants in very one sided deals.
In about 10 years time maybe the government may get round to regulating this. By then it will be too late for vulnerable people who lost their homes.

Horses for Courses
On another topic, one of the questions that vexes me is why do people spend thousands going on a course to learn about buy to let from companies who have terrible reputations for selling properties that are overvalued and won't rent well?
Just a few minutes on google would alert them to the poor performance of many of these players. Journalist Graham Norwood is the latest scribe to do a hatchet job on one of these firms in the weekend press.
So, if you have been mugged by one of these firms and spent £2,000 on a weekend’s course with one of them, please get in touch
Or maybe you think that the £1990.01 you paid over and above the cost of my own book, “Successful Property Letting – How to Make Money in Buy to Let” was £1990.01 extra well spent. If so, again, we would like to know.

About LettingFocus
If you need more advice on where to buy investment property ask me. I’m David Lawrenson from independent property investment experts www.lettingfocus.com
I’m the author of the landlords bible “Successful Property Letting - How to Make Money in Buy to Let” the UK’s top selling property title.
I’m an expert on property letting and a well known writer on buy to let and I contribute to newspapers and a host of property websites, write a property investment blog and run a landlord and tenant advice service - check out my columns for FinancialExpress.net and Archant’s “The Guide” magazine
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services.
You can read more of my landlord blog and details of my networking, advice, property investors seminar programme at my website www.lettingfocus.com.
What’s unique about lettingfocus.com is that we offer independent property investment mentoring because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.
If a property investment is lousy we’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Our main site is at www.LettingFocus.com
Copyright: David Lawrenson 2008. This blog is updated at least twice a week. Permission must be sought before using the material in the blog.

SALE AND RENT BACK - CALLS FOR REGULATION

Leading organisations are calling for the regulation of ‘sale and rent back’ schemes.
Citizens’ Advice, Shelter and the Council of Mortgage Lenders have written an open letter to the Treasury calling on it to allow the Financial Services Authority to implement regulation in order to provide protection for consumers.
This all follows exposure of the ‘mortgage rescue’ practice on television and in the press.
In one case, a woman sold her home for under market value to a sale and rent back company which then went bust, leaving her homeless and the house unoccupied.
The programme also showed a novice landlord hawking leaflets around a neighbourhood, offering to buy and rent back properties.

SARB
Under Sale and rent back schemes firms or individual landlords buy property from ‘distressed’ sellers at a substantial discount, with the former owners remaining in situ - but as tenants.
I know quite a few “good guys” who do this for a living and they always have the Home owner’s interest in mind.
These guys point out the drawbacks – one of which is that the owner turned tenant has no security of tenure beyond six months – and another is the fact that by doing this they may not qualify for housing benefit in the future.
However, I know that lots of below market value operators who are not do kind.

Speak to Mortgage Company First
For most people in mortgage arrears the best advice is to speak about their difficulties to the lender, who has a duty of care first.
The Residential Landlords Association adds that it is unfair and unethical to buy a property without an independent valuation.
In another subject, I hosted a great seminar yesterday. We had Paul Grimaldi the author of the top selling book on employing builders called “Getting the Builders In” Paul’s book is the UK’s top selling title on this topic.
You can buy this book from Amazon. Just click on the link to my book here.

ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
We are LettingFocus.com - the experts on buy to let and I’m David Lawrenson, the author of “Successful Property Letting” - the UK’s top selling property and buy to let book for the last 3 years.
At LettingFocus I offer independent unbiased advice for property investors covering all aspects of being a landlord and investing in let property.
Buy to let is largely unregulated and there are many sharks in the business of “advising” would be investors.
Unlike most other firms, I am not linked to a property company, developer, estate agency or bridging loan provider. I advise where to buy (which areas), what type of property to buy, when to buy, how to buy property at a low price, how to eliminate the risk of getting a bad tenant and more. I have been a landlord and property investor myself for over 25 years.


ABOUT LETTINGFOCUS.COM:
Our Events only take place twice a year. For our NEXT SEMINAR AND NETWORKING EVENT for Landlords and Property Investors click here:
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There are GREAT DEALS we have arranged for landlords by clicking here: Services and Products for Landlords and seeing our Landlords’ Resources (Useful Links) page.
If you sell products to landlords and property investors and you have national coverage and would like to be on this page as a partner, please get in touch!
For general info on our SEMINARS AND CONSULTING click here: Property Seminars, Networking Evenings and Consulting
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Copyright: David Lawrenson 2007. This blog is updated at least twice a week. Permission must be sought before using the material in the blog.

Below Market Value Properties and Sale and Rent Back

There is a huge growth in people selling their homes at well below market value to landlords and then renting them back and an industry has grown up where investors buy properties directly from “distressed sellers” in this way.
This is a real human interest story because where someone sells their own property and then rents back under a standard assured shorthold tenancy; the “seller turned renter” usually has no security of tenure.
Also, the seller will usually have sold their property at a low price to give themselves cash and resolve their debt problems.
This explains why there is so much interest from investors, not least because they can acquire a property with “no money down” using what’s called a “closed bridging loan”
I expect the number of people offloading their homes in this way to grow in the coming months as home owners come off fixed rate deals taken out 18 -24 months ago and face remortgaging at higher interest rates.
The investors find the dis

How Below Market Value Investors Find "Motivated Sellers"
These investors find distressed sellers in a number of ways.
One way is by leafleting. The message of these leaflets will be simple and along the lines of: “Do You Own Your Own Home? Do you need to Sell Quickly? Contact 0800 XXX XXX. Another way is by advertising on the internet - many of the 1.9 million sites that are returned when you key in “below market value property” are targeted at people who may be motivated sellers.
In recent years, many companies have been set up which use automated systems featuring call centres to field enquiries and filter out the genuine distressed sellers. They may then charge investors for each “lead” or an affiliate could “buy” the rights to all the leads that come onto his patch.
These leads cost the investor money but it means the person who is not a full time property investor - who has another job – can be “in the game” too.
It will usually be the investor’s job to negotiate with the seller and try to secure a deal to buy the property at a big discount from its market value. Once the deal is agreed the investor sets up a bridging loan for the discounted price and a mortgage for 100% (i.e. for the true value on the same day) – hence generating “instant equity”

Sale and Rent Back (SARB)
The seller now becomes a tenant of the landlord, can stay in his own home and his neighbours are none the wiser as to his change of status. However, he will usually have no security of tenure beyond the initial 6 months term under the standard tenancy agreement.
Clearly there are a few moral issues with the whole process - a process which has been pretty much ignored by the national press.
Many investors I know who do this, say they turn down some deals if they believe the seller could do better by doing something else – say remortgaging, talking to their lender, getting citizens advice help or by selling the property.
However, the question is how many others are as altruistic.
I forecast that in a few years the press and finally the Government will legislate against some of the worst practices in this rather murky business.

To find out more about buying property below market value and the truth about no money down deals ask me.

ABOUT LETTINGFOCUS.COM and DAVID LAWRENSON
We are LettingFocus.com - the landlords’ expert and I’m David Lawrenson, the author of “Successful Property Letting” - the UK’s top selling property and buy to let book for the last 3 years.
I have been a landlord and property investor myself for over 25 years.
At LettingFocus we offer independent unbiased advice for landlords and property investors on a one to one mentoring and coaching basis as well as occasional group seminars.
Unlike many in the still largely unregulated buy to let and property “advice” business I am not linked to a property company, developer, estate agency or bridging loan provider.
So I can give unbiased independent advice on where to buy (which areas), what type of property to buy, when to buy and how to buy property at a low price. I can also explain how to reduce the risk of getting a bad tenant.
We help you make money in property by showing you the ways that work and which are of minimal risk to you.

CHECK OUT THESE PAGES AT OUR SITE LETTINGFOCUS.COM:
Our Events only take place twice a year.
For our NEXT SEMINAR AND NETWORKING EVENT for Landlords and Property Investors click here:
Next Property Investing Seminar and Networking Event
We have GREAT OFFERS for landlords too.
Click here: Services and Products for Landlords to see our Landlords Resources (Useful Links) page.
If you are selling services to landlords and property investors and have a national coverage? You could be a partner, please get in touch!

For general info on our SEMINARS AND CONSULTING click here: Property Seminars, Networking Evenings and Consulting
ONE TO ONE CONSULTING click here: Property Consulting
CLIENT TESTIMONIALS. What past customers say about us: Testimonials

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Copyright of Blog: David Lawrenson 2009. This blog is updated roughly once a week usually on a Monday or Tuesday.

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