Want The Benefits Of Cash-flow From Properties Without All The Tax Liabilities?

Why would someone want to do a Rent-to-Own?

People would like to do a Rent-to-Own for a bunch of different reasons.

First of all one of the greatest reasons is that they get control of a piece of property and they can do things with it, before having to take eventual ownership to it. Now that could be that they get control of a property and they get to renovate it, they get to fix it, they get to clean it up, and whilst theyre doing that, theyre not incurring all the normal ownership costs that theyd normally have incur in order to do that.

One of the areas people seem to do this a lot are contractors, theyll come in, theyll buy a property on a rent to own, it enables them to use their contracting skills to get in, increase the value of the property, sell it, make a profit, without having to take on the ownership burden upfront. So, normally when someone takes on the ownership burden, theyve got to pay the stamp duties, and theyve got to pay the bank fees and all this sort of stuff, well with a Rent-to-Own, you can go in there and control it, you can renovate it, you can do whatever you need to do, to increase its value, but all those owners responsibilities are no longer with you, they are with the seller who still owns the property.

What about rates?

Quite often this is still held and paid for by the seller while youre in there on the rent to own basis. The other thing is to, you get to try before you buy.

Example

When buying womens shoes. Womens shoes are pretty expensive and theres nothing worse than paying a lot of money on an expensive pair of shoes that after a few weeks kill your feet. Imagine if you could go to the shoe shop, and rent the shoes for a while and if you liked them, you could pay for them, but if you didnt you could hand them back.

Thats what happens with rent to own. It enables you to get it, and try a house on or try a property on, decide if you like it, and if you like it, you keep it, and if you dont you can hand it back.

Example

I had a house once that was facing south, it was a waterfront, but it faced south. What I didnt know was, during the winter time, no sun whatsoever. The house got so cold, it was totally concrete, and at the end of a period of time, I decided that it wasnt the house for me, but I could hand it back. I hadnt already committed myself to the obligation of ownership, and what Rent-to-Own does, rent to buy says, it gives you the choice to, but not the obligation, if you dont want to.

So is there a trial period involved?

When you get a Rent-to-Own, a Rent-to-Own will have a trial period in there, could be one year, six years, two years, six months, three months. Rent to buy, the parameters within it, can be all over the shop.

Who makes those parameters?

The buyer and the seller.

It has to be an agreement with both people?

Correct. The seller might say, Ill give you a year to try this thing on. The buyer might say, I want two, and you negotiate from there. And the interesting thing about Rent-to-Own agreements, theyre never the same. If you got fifty people into a room to do Rent-to-Own agreements, none of them could agree on which was the best way to do them, because Rent-to-Own agreements all have variants and all of the variants will depend of the buyer and the seller, on the side of the road eating an ice cream, and deciding what everybody wants to get out of the transaction. When they figure out what they want to get out of the transaction, and get that put on paper, that becomes the terms of the Rent-to-Own, and every ones going to be different.

Its a mutual understanding of how things are.

When do you actually own the property?

When you get to own the property, is when you decide to actually buy the property, because remember under a Rent-to-Own, youre only controlling it, you dont own it. And theres another benefit of the Rent-to-Own, you may decide that you never want to take ownership of this property, although you can if you want to. And what you can have in a Rent-to-Own, is that you can decide that if youre only in the property because you wish to, say, profit from the property or reside in the property for a period of time, you may, through the assignment of the Rent-to-Own, you can give this opportunity to somebody else, and charge them a premium, and then they can elect to take ownership of the property.

So you can bring a third party in?

Quite often what youll find is many people might buy a house, they live in it for five or six years and they move. The traditional way of doing that is they move in there, they put their deposit down, they pay their stamp duty, they get a bank loan, they stay there and when they sell the house and go, they make some profit on it.

Well this is an instrument you can use that does exactly the same thing. You go in there, you stay in there, you take advantage of the profits, and you move out. The advantage is, you didnt take on board, all the obligations that would normally come with ownership. You didnt take on board, all the liability for loan debt or whatever, that would normally come with home ownership, and you also didnt have to take on board, all the fees and charges and costs associated with getting into the property. So it makes it a way to move into a property a lot less expensive than the traditional way. You still get to live in the property, you still get to do to the property what you want to do to the property, and when you exit, you can still benefit, from that relationship you had with the property. So thats another great benefit for people. And, if you, at the end of the day, dont want to take ownership, thats ok too, you dont have to. It just gives you more choice.

The other reason why people like rent to buy is that its a hidden asset. You see, you can have fifteen, sixteen or twenty rent to buy houses, but no one really knows that youve got them. Its a quirky thing. See, a lot of people, especially in this day and age where people sue each other, a lot of people like Rent-to-Buy because they can build a property portfolio and it doesnt really show up anywhere that theyve got this property portfolio.

So thats good when taxation time comes about?

Thats right. This is not all about not paying your tax, but at the end of the day, there are some people that like to build assets, and have what we call hidden assets. Also, its fast. To move into a rent to buy situation, you could probably do it in three days. Yet, if you wanted to purchase a house the traditional way, its probably going to take you about six weeks. So its very fast.

Also, when you move into a rent to buy situation, it requires a lot less cash. A lot less out of pocket money that you will have to put across the table, in order to secure your rent to buy position. Also, many times it enables you to turn this house into your home and change the living style to suit yourself, and for a lot of people they find thats an absolutely fantastic benefit. So, theres a bunch of different reasons there as to why people like rent to buys, but you know, one of the quirky parts about it is, there are a lot of people, especially first home owners, they can never take the psychological hurdle, or get over the fear factor of getting the house, because what if theyve bought the wrong house. So when they can rent a property, but they have the option of buying it if they want to, its an easy stepping stone for them to get their headspace into, well Ill try this property on and if I like it Ill stay, if I dont, I dont.

A couple of other great ideas you can do on a Rent-to-Own is quite often you might want to get a property on a Rent-to-Own and you can do a joint venture with the owner of the house, so that you might move into the Rent-to-Own and actually pay no money, and you might get in there on the Rent-to-Own and, over a period of time, just do some work to his house, renovate his house, in return for paying no money you can split the profits for the increased value that youve added to the mans house. Which is absolutely fantastic.

The other reason why Rent-to-Owns are good. One of the reasons people cant buy housing is that they simply cant save the deposit. So what you can do is pay extra rent and that extra rent pays towards building a deposit. So eventually when you decide to buy the house, it can be agreed in the paperwork, that this extra rent that youve been paying, which is like a for savings plan..

And now I have the deposit to show to the next financial institution in order to buy the house.

There is also a situation where many people want to move out of a house and they can use this instrument to say, you know what, with every house theres a debt bit, theres a cash bit, and everybody who moves out of a house only ever wants the cash bit.

So use this instrument in order to look after, or babysit, the debt bit and simply write the seller a cheque for his cash bit, and if you can write the seller a cheque for his cash bit so he can go away and you can babysit the dead bit, maybe thats a great way to do it because you dont have to go and get your own dead bit, you can just make payments on the existing debt, thats already attached to that house.

If you want more view here http://1poundhouse.co.uk/

by: 1PoundHouse

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