Why landlords like Rent-to-own?

Agenda:

Why is it beneficial for landlords to sell property through Rent-to-own?
What is the difference between selling through Rent-to-own and standard sale?
What is the difference for the Landlord between Rent-to-own and standard letting?

As the property investor, you typically buy the property to get financial profit from two aspects:

Rental Income.
Capital Gain.

Again typical Buy to Let landlords, while buying the property, will look to let it out for up to several years after which they are looking to sell. Although properties are financially beneficial investments in many cases, they can be time and money consuming at the same time. There is number of things which are making landlords’ life a bit more challenging, and they are the reason many people DO NOT invest in the property.

Let me name some of them:

Managing the property.
Even with the letting agent, the landlord needs to do the complete maintenance and compliant aspect of letting himself or pay the high premium for allowing the agent to do it for them. There is maintenance, gas, electricity certificate, EPCs, dealing with head lease, furniture removal, purchase plus constant issues with the properties which he needs to deal with usually immediately. If the landlord pays for it through the letting agent, it usually takes the whole rent profit.
Void periods.
One thing is the money, as when the property is empty, there is no rent coming in, and in addition to the mortgage, the landlord is likely to pay for utilities, council tax etc. The other more important aspect is the validity of their home insurance. If the property is vacant for too long, then the insurance may be invalid, making it very risky to own the property in the event of a claim.
The transition from letting to sales.
It takes time. You want to sell the property, so the property needs to be empty, and the landlord needs to give a two-month notice for tenants to move out. It might be longer up to the year if tenants are on a fixed tenancy agreement. Tenants don’t have to move out even with the notice being issued, making the process even longer. After tenants leave, the landlord has no income coming in but has to do at least some basic cleaning and maintenance to get the property ready for a sale. And then the process of purchase only starts where it usually takes months to find a buyer for an acceptable price and again months to complete the sale. Typically between tenants moving out and completion date, it takes eight months.
No clarity about the money and investment required.
ITo buy the property and have a deposit plus fees is one thing. The other is ongoing maintenance, some refurbishing, not being sure about monthly rent, which can go up and down, and finally, the sale price and when the sale will occur. Nearly all aspects of the property with the standard investment are a question mark.

So how does Rent-to-own work for the landlord?
Managing property - as the tenant-buyer is looking to purchase the property, the tenant-buyer deals with the vast majority of maintenance aspects. The landlord, therefore, can sleep tight ;) All regulatory required aspects are dealt with by the joint venturer. There are no void periods as tenants are looking to purchase the property at the agreed time. Also, the insurance is no longer the issue as tenants buyers deal with it and pay the premiums. There is no transition between letting and sales. This saves A LOT OF MONEY AND EFFORT for the landlord. The landlord is aware of all figures and money coming in from day one. No question marks for him. Because of the above reasons, landlords are very keen to sell the properties through Rent-to-own. They just probably lack the knowledge to do so at the moment. Legal aspects are also important for landlords. They usually have a Buy to Let mortgage, and the letting part of Rent-to-own is compliant with lenders requirements. Tax affairs are also very clear from day one and allow the landlord to prepare themselves for a tax return when the sale occurs.

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Why landlords like Rent-to-own?

Agenda:

Why is it beneficial for landlords to sell property through Rent-to-own?
What is the difference between selling through Rent-to-own and standard sale?
What is the difference for the Landlord between Rent-to-own and standard letting?

As the property investor, you typically buy the property to get financial profit from two aspects:

Rental Income.
Capital Gain.

Let me name some of them:

Managing the property.
Even with the letting agent, the landlord needs to do the complete maintenance and compliant aspect of letting himself or pay the high premium for allowing the agent to do it for them. There is maintenance, gas, electricity certificate, EPCs, dealing with head lease, furniture removal, purchase plus constant issues with the properties which he needs to deal with usually immediately. If the landlord pays for it through the letting agent, it usually takes the whole rent profit.
Void periods.
One thing is the money, as when the property is empty, there is no rent coming in, and in addition to the mortgage, the landlord is likely to pay for utilities, council tax etc. The other more important aspect is the validity of their home insurance. If the property is vacant for too long, then the insurance may be invalid, making it very risky to own the property in the event of a claim.
The transition from letting to sales.
It takes time. You want to sell the property, so the property needs to be empty, and the landlord needs to give a two-month notice for tenants to move out. It might be longer up to the year if tenants are on a fixed tenancy agreement. Tenants don’t have to move out even with the notice being issued, making the process even longer. After tenants leave, the landlord has no income coming in but has to do at least some basic cleaning and maintenance to get the property ready for a sale. And then the process of purchase only starts where it usually takes months to find a buyer for an acceptable price and again months to complete the sale. Typically between tenants moving out and completion date, it takes eight months.
No clarity about the money and investment required.
ITo buy the property and have a deposit plus fees is one thing. The other is ongoing maintenance, some refurbishing, not being sure about monthly rent, which can go up and down, and finally, the sale price and when the sale will occur. Nearly all aspects of the property with the standard investment are a question mark.