What is The Property Step System?

Why do Tenants Rent?

• 57% - Can't afford their own property.
• 23% - Saving for a deposit
• 14% - Waiting for house prices to stabilise or reduce
• 14% - Want flexibility
• 12% - Poor Credit
• 11% - Can rent in an area they want to live, but can't afford to purchase
• 8% - Recently arrive in the UK
• 6% - Ineligible for a Mortgage

TENANT BUYER (8% - Recently arrive in the UK) - We spoke to a Tenant Buyer from New Zealand, Mr B. He moved permanently to the UK 4 months ago staying in temporary accommodation because his ex-partner moved back to the UK with their 6 year old daughter and was looking for a 2 bedroom flat. One bedroom for him and one bedroom for his daughter. He had £120,000 cash deposit, which was not enough for a two bedroom and mortgage lending was not possible at that point, with no financial history. Using the Property Step System, this allows him to find the two bedroom apartment he wants to buy and call home. For his 6 year old daughter, its a big move to a new country and really wants her to be settled, without having to move again. So, he takes out a 'Rent to Own', 'Agreed to buy now, pay later' option and rents the two bedroom apartment for two years, with the option to buy at a pre-agreed purchase price of £210,000. This then allows him to register on the electoral roll, open a bank account with his salary going in building up a credit score and working out an action plan with our mortgage adviser. Some mortgage lenders like HSBC will consider lending to him after six months, but the majority of the mortgage market is 12 months. Mr B can then complete on the sale at any time during the two years. He doesn't have to unsettle his daughter and can treat the property like his own. He wanted to put new carpets throughout and a new shower room.

No tenant wants to pay out of their own money for a new shower room and new carpets but a tenant buyer will and is happy to do so. He knows this is his home and any value he adds to the property, he benefits, because its the purchase price is already pre-agreed at the outset. The contract is legally tight and is like an exchange of contracts. Legally, the seller has agreed to sell on the conditions set out in the contract and cannot withdraw or pull out.

What are some of the risks?

• Mr B could lose his job / salary.

This is exactly the same risk as purchasing a property on day 1 and then defaulting on a mortgage. In this case, he would be defaulting on rent and would risk eviction in the normal way but also lose the right to purchase.

Here is an important point. The rent is £1,000 pcm and the rental period is 24 months, with a purchase price of £210,000. We look for a 10% deposit, which equates to £21,000, Mr B has the deposit money of £21,000 upfront which is placed in a protected client account. (with Client Protection Money Insurance certificate provided and members of The Property Ombudsman for complete peace of mind) if placed with the agent, or the solicitor dealing with the transaction. If Mr B does not proceed with the purchase, during the two years, he would lose part of the upfront 'option fee'. We pro-rate the full £21,000 into 24 months, depending on when he left and withdrew. In many cases, the 'option to purchase fee' is paid monthly, so Mr B could pay £1,875pcm over 24 months and if he left and withdraw after month 14, he would lose £12,250. (This is calculated: £21,000 divided by 24, multiply by 14 months) and if at the end of the 24 months, Mr B did not proceed, he would lose the full £21,000.

So, the take from this is, if you want to be a Tenant Buyer you need to be as close to 100% as possible, you will proceed and purchase the property. Your home and/or, payments will be at risk if you default or do not proceed with the purchase. On a positive note, try before you buy. In some cases having the flexibility withdraw prior to purchasing a property will be a big advantage for a Tenant Buyer.

LANDLORD SELLER - The landlord was looking to sell anyway. Now he will receive rent right up until the day of completion. This means no void periods, no council tax or utility bills. (The Landlord will still pay and keep up to date the building insurance policy, which we request yearly, until completion). The landlord seller now has a tenant who treats the property as their own and contractually the Tenant Buyer is responsible for all maintenance during this time. (However, this is not legally enforceable, under statutory law the landlord remain legally liable), but generally the Tenant Buyer will treat the property as their own and therefore fix most minor items. The landlord had 10 months left on his fixed term mortgage, so by agreement, the contract gives the tenant buyer two years to purchase, but not earlier than 10 months. This suits both parties and the landlord seller will save an early redemption charge by their mortgage lender. The Landlord has peace of mind knowing he has guaranteed rent for the period (we guarantee the rent) and a built in disposal of the property without any extra work on their part.

TENANT BUYER (12% - Poor Credit) - Unfortunately, rent is not counted towards a credit score, even though this is the biggest financial liability someone can have. We look at this on a case-by-case basis. However, we can directly link the rental payments into their credit score, so every time the tenant pays rent, they improve their credit score. PLEASE NOTE - the tenant buyer will need a UK Home Owner guarantor to underwrite the tenancy part of this contract. We will work with the tenant buyer and mortgage broker on ensuring any credit history is dealt with at the start of the contract and monitored throughout the period.

TENANT BUYER (57% - Can't afford their own property) - It would be unusual they can afford the rent, but cant afford a mortgage. Most of the time, its a lack of knowledge and direction. Setting a goal and a target is important, being accountable and committed it equally important and thirdly, if you can visualise the end result, normally the monthly mortgage payments will be less than the monthly rent. Hence, why a landlord is a landlord. The rent is more than the mortgage. (in most cases). However, our system is not going to be for everyone.

TENANT BUYER (23% - Saving for a deposit) - No deposit, no problem. Our system allows you to pay the monthly rent in the normal way, with a monthly 'top up', a monthly 'option purchase fee'. So, lets say the property is £210,000 and we'll need 10% plus fees £25,000. We look at your salary and how long this will take, how much you can afford, whether you have any savings now. Many Tenant Buyers already have savings. So, after reviewing it looks like you'll need 6 years 3 months, (75 months, £25,000 divided by 75 = an extra £333 pcm). So, we would do a 7 year contract, with a monthly payment of £1,333 pcm. (£1,000 rent and £333 'top up').

Here is an important point. The tenant buyer takes on the property, and by prior agreement, extends the house with planning and building regs, new kitchen, re-wire and the Tenant buyer spends £55,000. The original purchase price is £210,000, however, the value after 6 years and works is now £280,000. Who benefits? The Tenant Buyer. Actually we have just had one, the purchase price was £375,000 and the RICS valuation is £500,000. The tenant buyer obtained a mortgage at 75% LTV (Loan to Value) based on £500,000. This equates to £375,000. This means the tenant buyer needs to find £5,000 deposit and additional capital for stamp duty and fees.

TENANT BUYER (14% - Waiting for house prices to stabilise or reduce) - This is mainly education. With two million extra people coming into the country over the past two years (Where typically, its been 40,000 per year), the supply and demand is not going to change any time soon. Then add inflation. House prices are actually cheaper in 2025, than in 2016 when comparing in 'real terms'. I've spoken to people waiting 10 years for house prices to reduce, then work out the rent over the same time period. Lastly, lets take the past 50 years. There was a 'house price crash' in 2008, it took many months to reduce down by a low average of 20% below the height, reached in 2009 and in 2010 it was back at the same pre-level heights. The other time was 1989, the recession was much longer and the bottom was 1993 and 1994. So, unless you are mystic meg, in the past 50 years, property prices were increasing 47 years out of the last 50 years. Absolutely no one knows whether property prices will increase or decrease, but i do know, train drivers have just had a 15% pay increase. National minimum wage increased by 7% this year, junior doctors pay increase 22%. If wages go up, property prices go up. Imagine for one second, 50 years ago, trying to guess which three years, in the next 50 years, are going to be the best year to buy a property. Then imagine you bought a property in 2007, the worst possible time, the very height of the market. Guess what by 2014, you would have lost nothing and by 2015, you would be making money again.

14% - Want flexibility - The system is not for everyone and renting is the best option for these 14% of tenants.

The point is, 25% of the population now rent. A large proportion of this 25% do not want to rent and would prefer to buy. This is a big proportion of the housing market, not being properly catered for.

Why Rent? When you can 'Rent to Own'? ... Register your interest today.

*Data from interviews with more than 3,000 tenants Q1 March 2024.