Lease Options Property Investing Explained

Lease Options Property Investing Explained
Video Transcription

Dwayne Squires: In this video, I’m going to promise to you to reveal how if you’re new to property investing or experience that you will be able to get on the property investment ladder or build your property portfolio at a fraction of the time and at a fraction of the cost.

How would it feel being able to build a property portfolio rapidly rather than having to wait 20 to 30 years? Imagine being able to take away the stress and anxiety that comes with having to raise deposits of tens and thousand of pounds just to buy one property. Imagine doing all of this with limited risk. My name is Dwayne Squires, and I’m partner at Property Result Investments. We’ve helped many clients in the last 12 months do just that. In this video, I’m going to reveal how you can also do the same.

The strategy that I’m talking about for you to experience building a property portfolio at a fraction of the time and a fraction of the cost is a lease option. You may or may not have heard of it, but I just wanted to give you a quick summary of what it is. Number one is a lease option is really split into two, which is a lease, which is where you’re renting the property for a certain period of time and then for us and our clients that average is between seven to 10 years, but the key thing here is you get an option to buy that property at a certain time in the future. The benefit of achieving or doing a lease option is you’re locking a certain cashflow over a certain period of time, and you’re also locking in as an agreed price.

How does that benefit you? Number one, by doing so, you’re investing at a limited amount of capital in the lease options. That, typically, is between £5,000, to £6,000, to £7,000 versus investing anywhere net 20 plus thousand pounds in a straight buy to let. By having the option to pay for that property sometime in the future, you’re able to wait and generate a time to build the equity that you need. It’s a kind of below market value deal in the event that you actually exercise the option. Three, one of the benefits is the cashflow. You should be typically looking forward between £200 to 250 per month cashflow over that agreed period.

I just want to walk you through a quick example of lease options and the benefit for you. With the lease option, you agree at price. Let’s just say before you agree to a price, the market value is 70,000 pounds, and then you agree a price today, but to pay sometime in the future of a great price of 70,000 pounds, but the term that you have in order to exercise paying for that price is seven years. Then where the interest in a bit of the lease option is, you agree to pay a vendor a monthly amount of £200, but you’re renting it to a tenant for 450 pounds, meaning your cashflow is £250 per month. Now that means over one year that is £3,000 per year, so you’re getting a net cash for 3,000 pounds per year and you’re able to do so over seven years, which means over the term of the agreement you’re actually making 21,000 pounds and to get into a deal like this, you may just be investing £5,000 to £7,000.

Just for this example, you may invest £5,000, meaning your net profit is 16,000 pounds or a three to one ratio. You’ve invested one pound to get three pounds profit. Now that’s just the start of things. I just want to reveal another aspect is now just interest in it. You have agreed a price of £70,000 and let’s just say seven years down the line you say, “Yes, you want to pay that for that prophecy,” buy that property. You may need a deposit of 20% to 25% of the agreed price, which if we went just for calculation purposes of 20%, that’s £14,000. Actually, that £14,000 comes from your profit, so you’re now able to use your profit to pay for that property. Interestingly, over seven years, properties average between 3% to 5% increase per year on average.

Of that agreed time, that property no longer is worth £70,000, it’s worth around £90,000. Your gross profit, if you exercise the option, would be your £16,000 plus the equity of £20,000, so your gross is £36,000. Wow. That all stems from you only investing £5,000 to get £36,000. That’s a seven to one ratio. I’ll walk you through that again. Market price of £70k at the time. You agree £70,000, but your term is seven years. You’re making a net cashflow every year of £3,000 which is £21,000 over the term, and you’ve only paid £75,000 to gets into it. You have a net profit just based on cashflow of 16,000, a three to one ratio, but if you exercise that option, a future because it’s worth more, i.e., £90,000 now total is £36,000 profit, which based upon your capital invested 5,000 is a seven to one ratio. Wow.

I’ve given you the quick summary of what a lease option deal can do for you and how much further it can get you in your property investment journey. If you like this video, and you want to see more about how you can build your property portfolio in a short period of time, please like this video, plus subscribe to our YouTube channel.

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