There is a lot of advertising saying you can “buy a house for £1”, the fact is YOU CAN NOT, it is just marketing hype. The £1 will buy you an option agreement, this is an agreement that gives the holder the “right to buy” the asset (e.g. buy the property) for a pre-agreed price at a future date.
Lease options are not the same as “rent to own”, they are option agreements used as part of a solution for “rent to own”. If you are a tenant who wants to become a property buyer (referred to as a tenant-buyer) you need to ensure a solicitor is used to draft the lease option agreement.
Sandwich options is another term often used, this is not the array of choices on display at Pret A Manger, the sandwich option is effectively two options agreements working together. One agreement gives the holder the right to buy at a fixed price in the future, the second (subsequent) lease option agreement effectively passes on the right to buy to another.
Why do sandwich options exist? This allows the first option holder to have a right to buy (at say £100,000), the first holder then gives the second option holder the right to buy at a higher price (at say £110,000). In this way the first option holder will make a profit of £10,000 when the property is purchased by the subsequent option holder. This may all sound a little confusing, which is why you need a solicitor to draw up these agreements!
With mortgages harder to obtain some property investors are starting to “take control” of a property using a lease option. These investors then effectively sell on their right to buy (using what is referred to as a sandwich option) to a tenant buyer. Overall a win-win situation can be created here, both the property investor and the tenant-buyer win.
If you would like to know more about lease options and rent to own we suggest you visit a specialist forum, details found here http://www.repaymortgage.co.uk/blog/rent-to-own/
