Do you have property which you can’t refurbish? Your tenant will
If you own a rental property that is in need of refurbing… and you’d like to sell this property for above the market valuation, then Lukas’ story will interest you.
Lukas owns a successful engineering business in London. Now, Lukas didn’t like keeping his money in his bank. And he wasn’t a serious property person. However, he could see the potential for his money to grow if he invested in property. So Lukas decided to buy three properties in Manchester. His first property was a detached property. It was in need of a complete refurbishment. However, Lukas didn’t want to manage the refurb. Nor did he want the hassle of dealing with builders and tradespeople. So it was decided to find a tenant who would do a Rent to Own strategy. As you may know, this strategy is where the tenant agrees to put down a larger upfront deposit.
He agrees to buy the property at a future date. This is a win-win for Lukas as he doesn’t have to spend any of his money on a refurb. The tenant agreed to do the refurb themselves. Furthermore, Lukas can structure his capital gains tax more efficiently. Plus, he knows his tenant is going to buy this property. So will take good care of it whilst being his tenant.
But why would a tenant buy a Rent to Own property?
Well, in this particular case it turns out the tenant was an ex-footballer. He had a poor credit history. And needed time to rebuild it. So it was agreed his mother would buy the property to rent to her son over a four year term.
Anyway, here’s where Lukas’ story gets interesting…
Lukas had his property valued at £140,000. However, by using our services we were able to negotiate a future sales price of £160,000. That’s an extra £20,000. Plus a rental income of £500/month - around £3,000/year. With the extra £20,000 sales price. That’s £29,000 in total.
Then there were the savings Lukas made;
- No agent fees (£2,400).
- No letting agent fees (£1,800).
- No maintenance costs (£1,000).
- No home insurance payment (£500).
These savings totalled
Another semi-detached property in need of refurbishment was valued at £90,000. We arranged the sale price for Lukas of £101,000. That’s £11,000 more than the market valuation. The tenant buyers were a young couple who had moved to the UK. This meant they had no credit history. They paid a rent of £450/month – around £6,000/year. With the £11,000 that’s £17,000. There was no deposit paid as tenant/buyer agreed to carry out the refurbishment themselves. The term agreed was 3 years. As with his first property, there were other savings Lukas made. These totalled £6,000. With his second Rent to Own property we were able to generate a £23,000 profit for Lukas.
He was delighted. However Lukas had found a third property that was a great deal for him as well… It had been valued at £140,000, as it needed a refurbishment. So we focused on finding a buyer who would become a tenant and do the refurb themselves. The tenant buyers were a family relocating from London to Manchester.
Using the Rent to Own strategy we agreed a sales price of £155,000. That’s £15,000 more than the market valuation. Also we agreed a rental of £500/month – that’s £6,000/year. That’s £21,000 in total. And there was a three year term put in place. We were also able to save Lukas £6,000 in other costs. This means with his third property Lukas made a total of £27,000. Lukas was delighted with the Rent to Own strategy we used for his three properties. It…
“I’m absolutely delighted with Adam’s service.
He’s trustworthy, approachable and friendly.”
So if you own an investment property you don’t want to refurb, or you want to sell a property in the future and want to lock-in future profits. Or you need to sell off investment properties over a period of time to minimize any capital gains tax…
…then perhaps you should consider this profitable Rent to Own strategy.
Why not contact us today for a no obligation chat to see if this strategy is right for your situation? We’ll lay out the pros and cons of this strategy. You’ll then be able to make an informed decision. However, this could be a turning point in your life.