Finance Versus Options-Which Would You Choose?

Following on from yesterday’s blog about options contracts and the previous posts about finance availability, the question hit me:-

Assuming you had the choice, as an experienced investor, would you prefer to use an option contract to do a deal, or would you prefer to get finance and own the asset?

There is a raging debate about options and the legal complexities of using the contacts to acquire property on several forums right now. Having done a few, for me personally, the answer for me is very simple.

My Choice

Given the choice I would prefer to use finance and own the asset from the start. Owning the asset gives you leverage. Leverage is very important in property land. Leverage can mean the difference between survival or not.

There is a very steep learning curve when getting involved with options.They should never be used as a replacement for traditional ways of financing. ( By traditional I don’t necessarily just mean high street banks here, I mean all financing sources.) But, they can compliment it as another tool in your box.

However, it may be that my own view is because I am more traditional in my investing style. I’m not an empire builder. I like to do renovation projects as opposed to buy to let style investing. Buy to let are useful for some regular cash flow though. My own strategy is to keep enough BTL at a manageable level with big cash flow on each. This way, I need less of them. My tenants are very close by for ease of repairs and management issues. I prefer intense periods of activity and lengthy rests after!

Buy to let requires management, which either requires you doing it or getting someone else to do it. Managing hoards of tenants is not my ideal day in property land. That style of investing seems more like a <j.o.b> to me. (Urgh! That is such a dirty word.)

I like getting stuck in to a project and see it through to the bitter end. The satisfaction gained is immense at the end of a project. OK, I admit, I also like the seat-of-the-pants moments involved in renovations, the continual buzz of making decisions and the management of trades persons. It’s fun – for me anyway!

So, if I offered you finance to do any kind of deal you wanted-worldwide-would you still choose an option contract deal? If the answers is no, then you need to focus on finding a way to get the finance you need, just as we did, and not get distracted by side issues. The finance is there if you put effort in to find it.

I’m looking for your input here, as this is a question that I think is quite important and will help focus you on what type of investor you are-or think you are. It may help you to understand your motivation for continuing in property too. Please comment in the boxes below, I’d love to hear your thoughts.

LIKE THIS POST? THEN PLEASE SHARE IT WITH OTHERS!

Click Any Of The Buttons Below- or Click Above Right To Tweet It now!

Dont Be Shy! We Would Love Your Comments too-And We Always Respond.Thanks!