Purchase Option Agreements

or managed purchase option agreement (MPOA)

An MPOA is a creative way of selling your property. It doesn’t suit everyone. However, if you’re looking for the right price and can wait to ensure you achieve the right price then this could work for you.

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Structuring a purchase with a managed purchase option agreement

Solutions for difficult markets

The concept of an option agreement has been around in the financial world for many years and is a well-known strategy. However not many people know it can be applied to land and property purchases. Having an option gives the holder (of the option) the right to buy or sell something at an agreed price.

Option agreements are more common in the US. However with recent changes in the financial climate UK companies & property owners are turning to purchase option agreements in order to get deals over the line.  

At Graham Howard Properties we can offer our clients managed purchase option agreements. The vendor (our client) and the buyer (Graham Howard Properties) would agree on a purchase price and an option period, typically be between 2-5years.

Meanwhile the buyer (Graham Howard Properties) takes on the responsibility and cost of managing the property and pays the vendor a guaranteed monthly lease fee until the purchase is completed.

The buyer (Graham Howard Properties)  will use the option period to build the business (get the property to cash flow), which in some cases requires investment (refurbishments or extensions). “Building the business” will result in increasing the property value which the buyer can use to complete the purchase.

The vendor achieve their asking price plus also received the lease fee paid over the option period.

Some key benefits for the vendor/landlord

Vendor received more then just the asking price

The option lease fee payed to the vendor is theirs to keep as is paid as an addition to purchase price.

Not an instalment plan

An MPOA is not an instalment plan that vendor chips away at the total price in time. 

The buyer invests their money into the property

The buyer will be investing their money and time in to the property so they tend to look after the property that much more. 

Vendor does not have to manage tenants

The vendor or landlord does not manage the property or have to deal with tenants or issues 

Guaranteed lease payment

The lease fee is guaranteed regardless of whether the property is rented out or not. 

Why a Management Purchase Option Agreement may be right for you.

Avoid Early Redemption fee

The redemption fee, is fee that you may have to pay if you are
exiting from your mortgage product.
In some cases, this could cost thousands of pounds and could be
avoided by selling your property after your mortgage product
expiries.

With an MPOA, once you have agreed on the price, you can then
agree on the completion date of the agreement to align with the
expiry date of mortgage product, giving you a massive saving in
fees.

Managed Purchase option agreement

Price

In the current and uncertain market, it could be difficult achieving
the amount that you want for your property.
However, you may be able to achieve it if you are flexible on the
terms.

When considering selling an investment property, you must
bear in mind, how the buyer will fund the purchase and if a
mortgage is required, the property will need to stack up
commercially for the mortgage to be accepted.
An MPOA (Managed Purchase Option Agreement) allows the buyer to build in value into the investment, by
creating a business to show evidence that the property can commercially stack. This could also allow the buyer to stack the
property at the price you require.

Empty property, cost of maintenance to tenants and more.

With an MPOA (Managed Purchase Option Agreement) all cost and responsibilities of running the property will be taken on the buyer. This will include managing tenants, all repairs, property documentation and safety certification.

Don’t want an instant sale

If you are not quite ready to sell your property yet, however would like to agree a sale for the future an MPOA (Managed Purchase Option Agreement) could be an excellent way to get your ducks in a row. You can agree a price and terms to coincide so the completion of the sale can align with the time you would like to sell. This also allows the vendor to become completely hands free from their property

You don’t have the time or desire to deal with the property.

Once the MPOA (Managed Purchase Option Agreement) is in place, the vendor becomes completely hands free of the property. An MPOA can be put in place within a matter of weeks, rather than a traditional sale, which could take months.

Capital Gains Tax

An MPOA (Managed Purchase Option Agreement) is an excellent way to maximise your capital gains tax allowance, if you have multiple properties you would like to sell. The dates of completion for each property can be agreed to coincided with tax years.

Mortgage Payments

With an MPOA (Managed Purchase Option Agreement) , we would agree to pay the mortgage payments direct to the mortgage company. So you always know your investment cost are always paid

Empty property, cost of maintenance to tenants and more.

With an MPOA (Managed Purchase Option Agreement)  all cost and responsibilities of running the property will be taken on the buyer. This will include managing tenants, all repairs, property documentation and safety certification.

Managed Purchase Option Agreements

Remember and MPNO is not always for everyone, for instants if you need the money now for a new purchase. But you never know, our team can help you go through the options and discuss how they work. So get in contact today.
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