Estimated Read Time: 8 minutes
Editor: Shaun Callacher
4 Things To Negotiate Before Signing Up A Lease Option Contract
The information I share with you below is regarding a purchase lease option, to find out what a purchase lease option is and how to find them in your area download my Ebook for FREE: ‘How To Start Your Property Portfolio With No Mortgage & Small Funds: Using Lease’s & Purchase Lease Options’.
Over the years there are a couple of experiences that have made me alter our purchase lease option contracts. The reason? To reduce our risk
The great thing about purchase lease options if done correctly, is, they can be a very low risk investment. All investments have some element of risk, if it's not monetary it could be time!
However with purchase lease options you can lower that risk with experience- whether that's your experience or your mentors.
In this post I share four things to negotiate with the landlord before signing up a purchase lease option contract. These are things your solicitor certainly wouldn't advise you on. Your solicitor is there to write up the legal jargon to protect you in law. It is your job to create the deal as sweet as possible for you, and to maximise your profit!
Below I share what you should consider negotiating in your purchase lease option contracts. You should be negotiating the following points for every deal you, as they can save you a lot of money!
1/ Furniture & White Goods
Who covers white goods and furniture? When you take control of a lease or a purchase lease option you are taking a property off the landlord. This means you may also inherit their furniture and white goods (such as a washing machine and fridge) and although the goods may look okay upon viewing and inspection, you do not know how good they are until your tenants put it through the test! This is why in every deal we do, we ask the landlord to cover the liability of furniture and white goods, at the very least, for the first year.
There is nothing worse than taking over a property, and two weeks later the boiler packs in! Boilers are expensive if they break. This also applies to furniture and white goods, it is difficult to test them prior to moving in. Negotiate with the landlord who takes care of the boiler, preferably you want the landlord to have the responsibility.
3/ Payment Date
Cash flow is a massive factor when it comes to any business. The same is true for a property business. If you have all your tenants paying you on the 1st day of each month, If possible you want to set up your outgoing lease fee to the landlord at a later date in the month. Why? - To collect your tenants rent before you have to pay the landlord. If you don't do this you will always be in arrears and will have to fork out money from your own pocket.
4/ Structural Care
In all our leases and lease option contracts we ensure the landlord is taking responsibility for the structural care of the property. This includes the roof, windows and plumbing (anything outside/externally). Once again, without spending money on surveys, which cost money, there is no way you know the standard of the structural building until the potential problem arises. Previously in the past we have had roofing issues and plumbing issues a couple of months down the line after signing up a purchase lease option but as we had negotiated well, it was the landlord’s responsibility to put it right. Which they did, all without it costing us a penny.
All of the above are important factors to negotiate when it comes to taking on a lease or a purchase lease option. The good thing about most of the above factors is that they can be covered via insurance and so therefore if the landlord does have the burden of looking after them it shouldn’t cost them too much either, if insured correctly!
To learn how to invest using property leases & purchase lease options download my Ebook here: 'How To Start Your Property Portfolio With No Mortgage & Small Funds'
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