Typical Rent-to-own tenant-buyer and who can purchase Rent-to-own.
Agenda:
- Understand who can buy the Rent-to-own property.
- Understand which of your circumstances are the best for Rent-to-own.
We believe Rent-to-own is the future of the world where no mortgage is required to buy the property, and everyone can buy the house when he wants and not when he can.
The requirements we have are simple:
- Tenant-buyer needs to be able to purchase the property legally. Typically, the individual has to have legal rights to stay in the UK and is not a citizen of officially blacklisted countries.
- Deposit transfer needs to meet our internal Anti Money Laundering requirements, which means we need to be happy with the proof and source of the deposit. And yes, we are working on accepting cryptocurrencies as the method of payment.
>> No or bad credit history.
You are required to get a mortgage only when purchasing, so you can be confident that even credit history is less relevant. However, depending on the severity of your situation, we may ask you to put down a higher deposit or/and require you to make regular overpayments towards your purchase. It is due to the lenders likely asking for a higher deposit at the time of the purchase. You and I need to be prepared for this situation in the future. We will examine your current credit profile throughout to ensure the risk of you obtaining the mortgage in the future is kept to the minimum. In addition to that, we will carry out half annual credit file checks to make sure you are in progress with your improving credit score and get a mortgage advisor to guide you through regularly.
>> Low or no income.
We are sympathetic towards your income as we understand that it can go down, up and down. So regardless of the situation, we are very likely to give the green light to clients with low or no income, subject to seeing the likelihood of their income going up sufficiently to get a mortgage. You may have just started the business, or your business is not generating high income yet, you may have little kids, and one of you is not working at all or on reduced hours. As long as there is a way up with your earnings, we are ok.
>> Foreign nationals or just moved to the UK.
Probably one of the primary sources of clients. You are in the UK with no or little credit history, and just no one will give you a mortgage. But you are here not to rent, but to own your place. If you are legally in the UK, or perhaps you are just about to move to the UK, Rent-to-own might be the best option for you. Subject to further checks, clients from abroad are very likely to be accepted, especially with higher deposits.
>> Personal circumstances.
Your circumstances prevent you from owning the property, but you wish to have a permanent place which you will be able to buy in some time. It might be just anything, but the most common circumstances that come across are divorces, death in a family, prison sentence or failed businesses. We are sympathetic towards any of these or similar events. Rent-to-own is the right option for you.
>> Single parents often have lower income.
As you are likely to increase your revenue once your kids go to school or become independent, it is just fine for Rent-to-own. You will apply for the mortgage and purchase once your circumstances will be better in few years.
>> Students or graduates.
As a student or a graduate, you typically don't have income but still need to live somewhere. There is usually just rented accommodation available. But Rent-to-own is the far better option. It usually is a close family who provides a deposit, which is by all means fine. As the purchase option can be assigned to the other individual or firm, even if a student cannot complete it, someone else can purchase it instead. So it is a win-win situation.
>> People with significant current commitments.
Some of our tenant-buyers are on high wages, but their monthly obligations make them not approved to obtain the mortgage. With Rent-to-own, your credit profile is only really relevant once you apply for the mortgage. So as long as there is a way to pay off your commitments, Rent-to-own is an option for you. So if you have Car Finance, large Credit Card bills, personal loans, plus a student loan at the moment, it doesn't mean you will have all these commitments in years to come.
>> Sharia Law.
With Rent-to-own, you don’t need to apply for the mortgage or pay any rent. We may schedule the agreement to be Sharia Law compliant, and all your payment goes towards the higher purchase price. In addition to regular fixed overpayments, you can own the property outright after the Rent-to-own term.
>> Conclusions.
The typical best client for Rent-to-own is the bad client for a mortgage People with all sorts of problems are accepted for the Rent-to-own scheme. You can be sure that as long as you have legal rights to stay in the UK and prove money for the deposit, you are eligible for Rent-to-own.
The joint venturer taking responsibility for payment of anything to do with the property, including:
- Utilities, council tax.
- Letting fees.
- Home insurance.
- Maintenance.
Further reading:
- Why applications are declined?
- Guide to Islamic Sharia Complaint mortgages house purchases plans
- Student home purchases
Rent-to-own process for landlords.
Agenda:
- Understand the whole process from the enquiry until the final purchase.
- The whole process is relatively straightforward and designed to be as landlord-friendly and savings-driven as possible.
First thing first, we need your basic details. To start the process, please go www.bespokepropertywealth.co.uk and register your interest as the landlord. You will be required to provide some basic information about yourself as the landlord. Once that is sorted, and you activate registration by confirming the receipt of the email, we will arrange a phone appointment with you to discuss all your requirements and circumstances. You will be asked to provide property details to do due diligence because it is a long term rent and sale; we need to make sure that the property, legals and finance are sound.
We require the following:
- Title - that obviously can be downloaded by ourselves, but we need any confirmation of any additional charges/restrictions.
- Mortgage or charge - we need to see proof of your finance. Ideally, a mortgage statement or mortgage offer to confirm the balance, monthly payment, end of any mortgage product deal, and property allowed to be let. Mortgage statements will be required to be provided to the joint venturer regularly to ensure there are no arrears.
- Proof of identity and address.
- Latest valuation report if it is available.
Once we receive all possible documents and do our internal checks, we will be in a position to make you an offer on the property. The offer contains the sale price, monthly rent and term. If you are looking to receive a higher sale price, we are keen to do it longer-term. All you need to do is to accept the offer :)
The agreement each landlord signs is a joint venture agreement. The most important aspect of the deal is the set monthly rent, the set sale price and the term. Rent can be arranged to be paid monthly, quarterly or even annually. The rent level stays the same during the agreement. We can even pay rent in advance for up to 6 months! The fixed sale price. Payable on completion of the sale. The term is usually set half-yearly. So if we are looking for three years for a tenant-buyer, we will agree to a 3.5-year term with the landlord, which allows little extra time for finding a tenant-buyer and any delays with sale completion. Deposit. We aim to pay at least £5k or 3-7% of the value for each property to the landlord.
The wording on the agreement is that the joint venturer receives on completion any amount over the set sale price or monthly over the set rent. So, the set sale price is £240k, and the fixed rent is £1000. The actual sale price is £260k, and the monthly rent is £1100. Then the joint venturer profit difference between £260k and £240k so £20k and £100 monthly profit. The agreement is designed to allow the further sale of the property to the tenant-buyer at a specific time. The joint venture agreement is not required to be signed by the solicitor. It also contains the Power of Authority to the joint venturer, allowing individuals to deal with anything relevant to the property. The agreement allows the joint venturer to register a restriction on the title preventing the property owner from selling or capital raising without tenant-buyer approval.
The joint venturer is the Limited company or precisely Special Purchase Vehicle created only to be a joint venturer to several Rent-to-own deals. Even though they have been established, the companies form a group of companies that work directly with Bespoke Property Wealth under the directorship of the same people. The only goal for the company is to create a profit from the sale, and therefore, they aim to complete the sale of the properties as it is the only time when the gain is made. The monthly rent is payable in the first instance to the mortgage company. So let’s say rent is £1000 and a monthly mortgage is £600. We pay £600 to the lender and £400 to the landlord directly.
The joint venturer taking responsibility for payment of anything to do with the property, including:
- Utilities, council tax.
- Letting fees.
- Home insurance.
- Maintenance.
The landlord responsibility is to provide a financial statement from the lender regularly and start the legal process on time.