BPW | Rent-to-own advantages and disadvantage for landlords
 
 

Rent-to-own advantages and disadvantage for landlords.



Agenda:

  • Understand the advantages.
  • Understand the risk
  • Understand how to deal with the Rent-to-own risk.
  • Understand which of your circumstances are the best for Rent-to-own.

Below is the list of ten advantages of the Rent-to-own scheme:


>> YOU CAN SELL PROPERTY IN ONE DAY.
All you need to do is to sign a Joint Venture Agreement and start receiving rent and secure the sale price. Tenants-buyers are waiting for your property.


>> SECURED SALE PRICE.
you have a fixed sale price of the property. Even if property prices go down, you can be confident that you have a deal secured with an agreed price.


>> GUARANTEED RENT.
the rent is guaranteed by the joint venturer and not the tenant. So if the tenant won't pay rent or is late, the landlord still receives it on time.


>> FIXED MONTHLY NET RENT.
the level of rent is guaranteed during the rent-to-own period.


>> FIXED MONTHLY NET RENT.
the level of rent is guaranteed during the rent-to-own period.


>> NO SALES AGENT FEES.
there are no selling agency fees. The tenant-buyer pays all selling fees. That's around 1.5% of the selling price saved.


>> NO LETTING AGENT FEES.
all landlords receive is a net rent figure. So the figure is not deducted by any fees.


>> NO MAINTENANCE OR LEGAL COSTS.
all that fees are being taken care of by the joint venturer.


>> YOU DON'T HAVE TO DO ANY REFURBISHMENT.
the tenant-buyer can do all. If you have been told to do some work by an estate agent, save money and don’t do it.


>> NO VOIDS.
tenant buyers have to make payments to buy the property, so there is very little chance of rent default and even if the rent is always paid and guaranteed by the joint venturer.


>> SAVINGS ON TAX.
some landlords and tenant buyers find increasing a purchase price while lowering a monthly long term rent as a better option. That way, your tax bill can decrease and be delayed.


As with everything in our lives, Rent-to-own has some disadvantage which you should be aware of:


>> FIXED SALE PRICE.
You may find that the purchase price increased, and it is higher than on the agreement. Well, on the other hand, it can go down. It is an investment sale, and it is a calculated risk, but on the other hand, the landlord has a secured buyer with secured rent over the agreement period. Lack of any sales fees also helps a lot.


>> LOWER RENT.
long term rent is always lower than short term rent. The typical difference is about 10%. The advantage is no void periods and guaranteed rent for years.


>> LITTLE MONEY TODAY.
in some circumstances, the landlord can receive part of the deposit paid by the tenant-buyer but let’s face it - by selling with the Rent-to-own, you get money at the expiry of the agreement. So if you are looking to sell because you need to cash in all your equity Bespoke Property Wealth is not the option.


>> NO CAPITAL RAISING DURING AGREEMENT.
unless communicated and discussed before signing joint venturer agreement, no capital raising or remortgage is permitted unless approved by tenant-buyer. If you are looking to remortgage and doing capital raising, please communicate first, as you may not have that option during the agreement term.t the expiry of the agreement. So if you are looking to sell because you need to cash in all your equity Bespoke Property Wealth is not the option.


There are certain aspects each landlord has to consider and be, potentially, able to deal with. Valuation risk. If the market is down and prices go down, there is little chance that the tenant-buyer will complete the transaction. It won’t make financial sense, but more importantly, the tenant buyer might be short of money due to down valuation. We advise both landlord and tenant-buyer at that stage to extend the agreement term by initially one year. We all want a good deal at the end of the day, but we want to look after every person involved and don’t put good tenants buyers into trouble. Some tenant-buyers' circumstances, which they do not control, can prevent them from completing the purchase on time. It varies from a break in the relationship, death, temporary job problems etc.; we kindly ask both landlord and tenant-buyer to extend the agreement term to allow the tenant-buyer to complete the transaction.


The joint venturer taking responsibility for payment of anything to do with the property, including:

  • Rent-to-own is a relatively low-risk product.
  • The main risk of the valuation of the property can be dealt with as an extension of the agreement.
  • Money from sale with Rent-to-own and comes only at the end of the agreement.

1
Created on

Rent-to-own advantages and disadvantage for landlords

1 / 5

Theo was approaching his Rent-to-own end of term and got a valuation of £150000 for his property which has a fixed price of £160000. What is the purchase price of Theo property:

2 / 5

Kath was approaching her Rent-to-own end of term and got a valuation of £170000 for his property. The fixed price of the property is £190000. What is the purchase price of Kath property:

3 / 5

Back to question 2. What option does Kath have with the property down valuation:

4 / 5

Christos signed the three-year Rent-to-own Joint Venture Agreement today. When will Christos receive money from the sale?

5 / 5

The market rent of the property is £1000. What rent is the landlord likely to receive on a long term joint venture agreement?

Your score is

The average score is 80%

0%


 

 

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Rent-to-own process for landlords.



Agenda:

  • Understand the whole process from the enquiry until the final purchase.
  • The whole process is relatively straightforward and designed to be as landlord-friendly and savings-driven as possible.

First thing first, we need your basic details. To start the process, please go www.bespokepropertywealth.co.uk and register your interest as the landlord. You will be required to provide some basic information about yourself as the landlord. Once that is sorted, and you activate registration by confirming the receipt of the email, we will arrange a phone appointment with you to discuss all your requirements and circumstances. You will be asked to provide property details to do due diligence because it is a long term rent and sale; we need to make sure that the property, legals and finance are sound.


We require the following:

  • Title - that obviously can be downloaded by ourselves, but we need any confirmation of any additional charges/restrictions.
  • Mortgage or charge - we need to see proof of your finance. Ideally, a mortgage statement or mortgage offer to confirm the balance, monthly payment, end of any mortgage product deal, and property allowed to be let. Mortgage statements will be required to be provided to the joint venturer regularly to ensure there are no arrears.
  • Proof of identity and address.
  • Latest valuation report if it is available.

Once we receive all possible documents and do our internal checks, we will be in a position to make you an offer on the property. The offer contains the sale price, monthly rent and term. If you are looking to receive a higher sale price, we are keen to do it longer-term. All you need to do is to accept the offer :)


The agreement each landlord signs is a joint venture agreement. The most important aspect of the deal is the set monthly rent, the set sale price and the term. Rent can be arranged to be paid monthly, quarterly or even annually. The rent level stays the same during the agreement. We can even pay rent in advance for up to 6 months! The fixed sale price. Payable on completion of the sale. The term is usually set half-yearly. So if we are looking for three years for a tenant-buyer, we will agree to a 3.5-year term with the landlord, which allows little extra time for finding a tenant-buyer and any delays with sale completion. Deposit. We aim to pay at least £5k or 3-7% of the value for each property to the landlord.


The wording on the agreement is that the joint venturer receives on completion any amount over the set sale price or monthly over the set rent. So, the set sale price is £240k, and the fixed rent is £1000. The actual sale price is £260k, and the monthly rent is £1100. Then the joint venturer profit difference between £260k and £240k so £20k and £100 monthly profit. The agreement is designed to allow the further sale of the property to the tenant-buyer at a specific time. The joint venture agreement is not required to be signed by the solicitor. It also contains the Power of Authority to the joint venturer, allowing individuals to deal with anything relevant to the property. The agreement allows the joint venturer to register a restriction on the title preventing the property owner from selling or capital raising without tenant-buyer approval.


The joint venturer is the Limited company or precisely Special Purchase Vehicle created only to be a joint venturer to several Rent-to-own deals. Even though they have been established, the companies form a group of companies that work directly with Bespoke Property Wealth under the directorship of the same people. The only goal for the company is to create a profit from the sale, and therefore, they aim to complete the sale of the properties as it is the only time when the gain is made. The monthly rent is payable in the first instance to the mortgage company. So let’s say rent is £1000 and a monthly mortgage is £600. We pay £600 to the lender and £400 to the landlord directly.


The joint venturer taking responsibility for payment of anything to do with the property, including:

  • Utilities, council tax.
  • Letting fees.
  • Home insurance.
  • Maintenance.

The landlord responsibility is to provide a financial statement from the lender regularly and start the legal process on time.


1
Created on

Rent-to-own advantages and disadvantage for landlords

1 / 5

Theo was approaching his Rent-to-own end of term and got a valuation of £150000 for his property which has a fixed price of £160000. What is the purchase price of Theo property:

2 / 5

Kath was approaching her Rent-to-own end of term and got a valuation of £170000 for his property. The fixed price of the property is £190000. What is the purchase price of Kath property:

3 / 5

Back to question 2. What option does Kath have with the property down valuation:

4 / 5

Christos signed the three-year Rent-to-own Joint Venture Agreement today. When will Christos receive money from the sale?

5 / 5

The market rent of the property is £1000. What rent is the landlord likely to receive on a long term joint venture agreement?

Your score is

The average score is 80%

0%



Are you interested? Have questions?
Drop us a message or talk to us on Facebook
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