Also frequently referred to as Rent to Buy, taking out a lease option on a property is similar to Rent to Rent in the sense there’s not a huge financial outlay required. The investor has control of the property which they rent out for a monthly income. But there’s an additional benefit too – capital accumulation.
This strategy involves finding a seller willing to lease their property. The next stage is to put the agreement of exclusivity into writing, together with a timescale for the period of the lease (from four to 21 years), the purchase price of the property and a lease option fee (usually five per cent or less).
This provides the investor with a cash flow when renting and, if you plan on buying it yourself, time to look around for the best mortgage. Other benefits include fewer void periods and low maintenance if your tenants plan on buying it themselves at a later date since they’ll look after it as if it’s already their own.