We need to understand why this person is selling the property? There are two groups of people fundamentally who might be selling property. The first one is a group of people where there's equity in the property, and they're selling that property because they want access. Maybe they need the money for something else. The equity is the difference between the value of the property, and a mortgage that might be on the property. They need the cash for something else. In that case, a PLO is just not going to work. They're not going to get the money now, we're suggesting to get the money in three or maybe five years' time. But there's a second group of people who are selling their properties.
It's a smaller group of people, but still a lot of people. They've got an alternative reason for selling. Maybe they've got equity, maybe they haven't got equity in their property. But the whole point is they don't want this property, they want to get rid of it. They want to get away from the hassle. They want to get away from the liability of the debt. But here's the important point, they don't need the money from the sale. They're not selling it to get the money. In group one, they're selling to get the money. This is group two, people who just want to get away from the property, get rid of it. They don't necessarily need the money, which means they're just going to put the money in the bank. We know at the moment, money in the bank is not getting a very good return. So in this case, PLOs could be absolutely perfect. So we want to make sure that first of all, the person doesn't need the money and secondly, they have favourable mortgage conditions. So what are these? Well, if there's a mortgage we want a nice low interest rate. We want to get an interest only mortgage. This means if we're paying the mortgage on behalf of the owner, it's going to be nice, low payments. Ideally, we want a buy-to-let mortgage, because we already got permission rather to rent the flat out. We want a long period left on the mortgage. This is because if a mortgage is due to be paid back in two years we can't get a three or five-year option on it. Or maybe there's no mortgage at all. So we're looking for these favourable mortgage conditions.
By the way, if we want to do a Purchase Option we need to understand everything about the mortgage. Landlords are the best people to get the ideal mortgages from. Landlords probably have a low interest rate. Probably interest only. It should be a Buy-to-Let mortgage. They might have a long time left to run on the mortgage. So remember, we want both of these criteria in place for an Option to be appropriate. First of all, they don't need the money from the sale now because they're not going to get any money from the sale. Secondly, we want these favourable mortgage conditions. If we have both of these in place, then we could potentially do a Purchase Lease Option.
