Lease Options Explained
Over the last few months a number of companies have begun to offer a different way to buy and sell apartments using lease options. Developers are offereing variations of the scheme to make it easier for them to dispose of their unsold apartments. Investment companies have started to offer the option to their investors too, as a way out for those wanting to sell.
In most cases they ask for a large deposit - a big stumbling block for a local buyer in these troubled times. Even if they have an older soviet apartment to sell. This is because most owners will have taken credit for lifes' little luxuries like a new car, holiday or a country 'dacha' . It was just too easy when the banks were 'giving away' money! But they can be tempted with a no deposit offer.
for the seller
If you own an apartment where the rental income does not cover the outgoings and you are struggling to make your investment work, using a lease option to sell may be the way forward for you.
This is a very attractive proposition for a local buyer and in many cases even for an investor to buy property.
A prospective buyer would cover your mortgage as rental payments and agree to buy your property for a pre-detrmined price (usually at todays current third party valuation less a small percentage) within a set period of three to five years. This way you would have no capital gains tax (currently 25%) to pay on any profit you might make.
You would remain the legal owner until the buyer exercised his option. At which point he would buy at the agreed price less any capital repayments made to your bank in the option period.
All legal agreements are drawn up using a Latvian Jurist. In the worst case scenario if the buyer broke the agreement then you would at least have benefited from all mortgage payments being paid to that point. Basically you would have benefited from a careful tenant paying a premium rent and you could sell to someone else.
There is no charge of any kind made to you the seller for this service. We have waiting buyers for small apartments in or near the centre of Riga.
Benefits to you are:
Property is not selling, this is a way to sell
No real estate agency fees to pay saving you 2 to 5%
No fees of any kind, not even solicitors costs
Removes the necessity of paying 25% cgt on any profit
for the buyer
Purchasing a lease option is a simple No deposit, No mortgage needed way for a buyer to buy an apartment.
You agree an option to buy within a specified period of three to five years at a pre-determined price (usually a third party todays market valuation, less a small discount). You pay no deposit (except for a small security deposit - as with any rental agreement) and pay a set monthly rental to the owner (which covers his mortgage credit).
You can exercise your right to buy at any time within the option period. The price you pay will be the agreed price less any capiital repayments made by the owner to the bank.
Benefits to you are:
No deposit needed
You buy an asset three to five years in the future at todays price
No initial mortgage or credit required allowing time for the credit situation to improve
The owner can only sell to you or a third party designated by you. You are able to sell the option in the future if you wish
If you are an investor we can arrange for you to sub -let to re-coup a proportion of your monthly costs
All legal documentation and Jurist arranged for a single fee - which can be spread over three monthly payments if required
You are recorded in the Land Registry as having the sole right to buy within the agreed period.
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