Profit From Rent To Buy Schemes

Even if you are an eternal pessimist, you cannot fail to agree that brick and mortar properties increase in value over a period of time

. Although the last few years would have seen the prophets of doom rubbing their hands gleefully as house prices tumbled, property values always recover and are already within 10% of the all-time house price peak of July 2007. Some commentators predict further recovery beyond that point, and even rises of up to 25% over the next five years as the shockwaves that hit the finance industry subside, and lenders slacken their grip on mortgage availability. As with any commodity, the best time to buy is before a major increase in value, but not everybody is in a position to raise the substantial deposit required to purchase a property, and this is where rent to buy schemes can be an incredibly lucrative option.

Rent to buy programs are growing at a phenomenal rate across the UK. They allow tenants to move into a home under a long term lease arrangement with an option to buy the property at the end of the tenancy. The purchase price is set before occupation commences, so if the value of the property rises over (say) five years, the tenants have immediate equity in their new home. Furthermore, as the rental they have been paying is deducted from the purchase price, a much smaller amount of deposit is required plus a lower percentage of the propertys value by means of finance.

As an example of how this can be of benefit to a property investor, let us take the example of a house currently valued at 200.000. The investor arranges to pay a rent of 600 per month which equates to 7.200 per annum or 36.000 over a five year period. He fixes the future purchase price at 200.000.

During the five year tenancy, the house increases in value by 3% per year (compounded) so that when the investor comes to exercise his option to purchase, the house is valued at 231.855. Having already agreed a purchase price of 200.000 and paid 36.000 during his tenancy, the balance required by finance (164.000) represents less than 70% of the valuation and the investor has an instant 31.855 in equity in his property representing a 188% return on investment.

This scenario is not only applicable to property investors. Anybody can benefit from the potential increase in property values over the next few years

* This is an ideal program for first time buyers struggling to get on the property ladder.

* Tenants who are fed up paying rent and long for their own home.

* Anybody finding it difficult to raise a large deposit.

* People needing time to repair a damaged credit record, or new residents to the UK looking to establish one.

The great selling point about these schemes from an investors point of view is that they are entirely no-risk. If property price increases fail to materialise, you simply walk away from the option to purchase at the end of the tenancy period. However, even the most eternal pessimist would agree that now is the right time to potentially profit from rent to buy schemes.

by: Oliver Darraugh

POST COMMENT

Is email marketing for you? China's International Influence Of Plastics On The Market Increased How to avoid so many scammers when online shopping? Converter market in danger of China's remarkable breakthrough in city - Replacement Projector Lamp Manufacturer What is Article Marketing? Why Is Pr The Hot Potato Of Your Marketing Budget? Natural Gain Plus Review - Is it Really the Best Male Enhancement Pill on the Enhancer Market? How to Develop Perfect Marketing Message? What Your Direct Mail Marketing Postcards Should Always Provide Readers Marketing En Redes Sociales Y Su Relación Con El Posicionamiento What You Need To Know About Social Media Marketing Cristian Adonajlo é novo diretor de Marketing do Grupo Decolar.com How To Stop The "Spray And Pray" Marketing Method!