5 Lease Option PowerPlays

5 Lease Option PowerPlays
By

Hanif Khan, Shimon Rudich, & Richard Shepherd

“The Most Advanced Technical Reference On Lease Options In The UK...”

5 Lease Option PowerPlays

5 Lease Option PowerPlays
Introduction The year 2009 saw the concept of lease options explode onto the UK residential property scene. Although property options have existed in the UK for hundreds of years, a combination of the lack of mortgage finance, the UK property market bottoming-out and avid property investors determined to take advantage of both of these factors saw investors turn to more and more creative strategies for investing in residential property. In a property market that has already fallen by an average of 20%-25% from its peak in July 2007, property investors are eager to cash in on this Buy Opportunity Of A Lifetime - property prices are so low it is unlikely that we will see property prices this low again for the foreseeable future. However, the one hurdle investors do face is mortgage finance which is still difficult to obtain – especially for full-time property investors unable to prove their income. What this book will show you is how to take the banks out of the equation so that you can still buy properties regardless of whether the banks will lend to you or not. You will learn how to use the power of options to gain control of property, how to generate cashflow while you are in control of the property, and how to make tens or even hundreds of thousands of pounds whether you buy, keep, or sell properties. This book will give you 5 Advanced Option PowerPlays that you can use right now in this market to ‘buy’ property. We will look at the situation that each deal is good for as well as providing an analysis on the valuation, negotiation, the legal considerations and the numerical construction of each deal. This book is perfect for the current market of 2010. Rather than falling prey to the seemingly erratic nature of bank decision-making, each PowerPlay empowers you to continue to invest in property regardless of the prevailing mortgage conditions. Using these PowerPlays there is simply no excuse for anyone not to ‘buy’ properties. What Is An Option? Quite simply, an option gives you an opportunity to buy a specific property. The legal definition is that an option gives you the right, but not the obligation to buy an asset at a set price within a specific period of time. In other words: you can buy it if you want to, but you don’t have to if you don’t want to. Why is this desirable? Over the last 50 years UK property prices have doubled in value every 7-10 years. Let’s say that you have control of a £250,000 property today. Now let’s assume the mortgage is £230,000 and you had an option to buy it at £230,000 at any time over the next 10 years. By then the property should have doubled in price, i.e. £500k. Let’s just say you simply rent out the property at a profit of £250 per month. This is how this examples plays out:5 Lease Option PowerPlays

Introduction

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5 Lease Option PowerPlays

Upfront Profit: During The Option Term:

£0 £250 x 12 months = £3,000 X 10 years = £30,000

Back End Profit:

Property Value = £500,000 - £230,000 Purchase Price = £270,000

Total Profit:

£300,000

This is a huge £300,000 profit for simply controlling a property with the option to buy later. This is an example of what can be achieved using the power of options. Now do this once a month for 12 months and what you have is one highly effective strategy However this is merely one PowerPlay!

The Power Of Options:The phrase ‘lease options’ is very sexy in the UK property market right now. However, it is not the only way to capitalise on property options. Whereas some gurus may have you believe that lease options have only recently come to the UK from Australia and the USA, the reality is that property options have been used in the UK for hundreds of years. The objective behind this book is to show you that there are far more than just 1 or 2 methods that options can be applied to. At this point it should be noted that the authors broadly expect the UK property market to remain at its current level for the next 3 years plus – so at least until 2013. The 5 Lease Options PowerPlays presented in this book should help you create good cashflow and massive cash profits during this time and beyond. This manual is the culmination of years of investing, advising on property deals, legal research, and investment analysis not just from the authors’ own experience but also of the thousands of property investors that they have trained and represented between them. We present you with 5 PowerPlays here that you can use to immediate effect secure in the knowledge that other investors don’t have these PowerPlays at their disposal. This is a shame as you have already seen how easy it is to create tens of thousands, hundreds of thousands, or – in some cases over a million pounds’ worth of profit out of thin air.
5 Lease Option PowerPlays

Introduction

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5 Lease Option PowerPlays
You will learn how to give your dead deals the kiss of life, how to create quick cash in a falling market, how to do No Money Down deals, how to solve your sellers’ problems in a creative way, how to turn unworkable deals into moneyspinners using these 5 innovative Property Option PowerPlays. We present you in this short book with PowerPlays that relate to residential properties, developments, land and commercial property – which should unleash your creative energies and transform the way you do your property deals. Each PowerPlay comes complete with a Heads Of Terms which is a legal document. Use this Heads Of Terms as a template for the initial agreement that you would sign with a seller eager for you to take their property off their hands. You will simply get the seller to complete the Heads Of Terms along similar lines to the ones presented here and return to your solicitor to secure the deal. Each Heads Of Terms has been put together by MS-Law Solicitors who are the leading legal firm in the UK for residential option agreements. For the last 18 months MS-Law have been at the forefront of this revolution changing the face of lease options in the UK both in terms of their legal standing, but also in terms of their creative flair. This book is part of a much larger reference manual which demonstrates 51 Property Option PowerPlays – a 500 page 2 Volume Set delivered to your doorstep - which lays out all the latest groundbreaking methods that you can use today to create jaw-dropping property deals. This Reference Manual includes many secret PowerPlays that the authors have never taught property investors or clients before. This is not only the UK’s most advanced reference on options, but the most advanced reference on options that has ever been written in the English language. Please use the QuickRef overleaf to match the situation you are currently facing with your seller and therefore which PowerPlay or PowerPlays you can refer to for guidance on how you would go about structuring your specific option deal. The 5 PowerPlays contained here will give you many of the basic situations that you will find yourself in. For more advanced strategies where you’re looking to maximise the opportunity, you should refer to the 51 Property Options PowerPlays where you will get guidance on how to combine the PowerPlays and how to tailor them to your deal. We have given you within this book a flavour of the strategies in each of the different sectors: residential, land, development & commercial. In 51 Property Option PowerPlays - the 500 page 2Volume Reference Manual - we also include how to structure whole property portfolios using options, and how to combine the strategies. The 2 –Volume Set is only available on limited release so make sure we have your details here:-

www.LeaseOptionPowerPlays.com.

Hanif Khan, Shimon Rudich, Richard Shepherd

5 Lease Option PowerPlays

Introduction

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Quick Reference
How to Use The Lease Option PowerPlay Quick Reference While Property Options are very powerful, much of their power lies in being able to match your seller’s situation with the property and with your needs and to design an option agreement that is mutually beneficial. There is also a huge amount of flexibility in option agreements, and much of their flexibility lies in being able to steal ideas from certain PowerPlays and apply them to others when it is appropriate. The Quick Ref on the next few pages empowers you to construct creative option agreements based on the seller’s situation and the property.

What Is The Situation: This describes the situation your vendor is facing and matches it up with the type of property or problem.

Primary PowerPlays: Describe the 1 or 2 PowerPlays that are best matched for the situation described.

Secondary PowerPlays: These are other PowerPlays that could come into play instead, if the situation is similar but not necessarily an identical match to the situation described.

Other Possible Combinations: Read from left to right, each line of these PowerPlays are combinations that you can combine to put together perhaps the most powerful and creative option agreements for maximum cash out and maximum profit with minimum outlay.

5 Lease Option PowerPlays

QuickRef

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51 Property Options PowerPlays
Quick Reference
What Is The Situation? You Have A Vendor Who Is Moving Abroad And Cannot Sell Their Property

Primary PowerPlays: The Managed Option Contract

Secondary PowerPlays: The Classic Moc Multiplier The iMoc The Option Flip sMOC The Buy Out Option The Ugly Duckling Divide & Conquer Option The Sweat Equity Option The Vendor Double Dip Option The Cashback Option The Subsidised Option The Mission Impossible Option The Yin Yang Option The Instalment Contract The Guaranteed Rental Scheme The Contract Management Option The Corporate Option No Money Down Option The Trust Deed Option Traditional Vendor Finance Earnout Strategy The Option Lead Flip The Assignable MOC The Equity Split Option The Sandwich Option The LHA Strategy The Holiday Option Other Possible Combinations:

The iMoc The iMoc

The Buy Out Option sMOC The Buy Out Option The Option Flip

5 Lease Option PowerPlays

QuickRef

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51 Property Options PowerPlays
Quick Reference
What Is The Situation? Your Vendor Is In Negative Equity And Cannot Sell Their Property

Primary PowerPlays: The Cashback Option The Sweat Equity Option The Subsidised Option The Mission Impossible Option Secondary PowerPlays: The Managed Option Contract The Classic Moc Multiplier The Slice & Dice Divide & Conquer Option The Option Swap The iMoc The Instalment Contract The Guaranteed Rental Scheme The Contract Management Option sMOC The Option Lead Flip The Assignable MOC The Equity Split Option The Sandwich Option The LHA Strategy Other Possible Combinations:

The iMoc The iMoc The iMoc

The Classic Moc Multiplier sMOC sMOC The Sandwich Option The Sandwich Option The Sweat Equity Option

5 Lease Option PowerPlays

QuickRef

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51 Property Options PowerPlays
Quick Reference
What Is The Situation? The Property Is In Negative Equity & Negative Cashflow And Cannot Sell Their Property

Primary PowerPlays: The Mission Impossible Option The Cashback Option The Subsidised Option Secondary PowerPlays: The Managed Option Contract The Classic Moc Multiplier The Slice & Dice Divide & Conquer Option The Option Swap The iMoc The Instalment Contract The Contract Management Option The Corporate Option sMOC The Option Lead Flip The Assignable MOC The Equity Split Option The LHA Strategy Other Possible Combinations:

The iMoc The iMoc The Cashback Option The Subsidised Option

sMOC sMOC The LHA Strategy The Contract Management

The Mission Impossible Option The Option Swap The Classic Moc Multiplier

5 Lease Option PowerPlays

QuickRef

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51 Property Options PowerPlays
Quick Reference
What Is The Situation? Your Vendor Wants Nothing Less Than The Full Market Value for Their Property

Primary PowerPlays: The Managed Option Contract The Classic Moc Multiplier Secondary PowerPlays: The Option Flip The Slice & Dice Divide & Conquer Option The Vendor Double Dip Option The Option Swap The iMoc The Instalment Contract The Guaranteed Rental Scheme The Contract Management Option The Corporate Option Earnout Strategy The Option Lead Flip The Assignable MOC The Equity Split Option The Sandwich Option The LHA Strategy The Holiday Option Other Possible Combinations:

The Managed Option Contract The Managed Option Contract The Managed Option Contract

The Classic Moc Multiplier The Vendor Double Dip Option The LHA Strategy

5 Lease Option PowerPlays

QuickRef

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51 Property Options PowerPlays
Quick Reference
What Is The Situation? You Want To Buy A Large Property, But It Is Not Possible To Let As An HMO

Primary PowerPlays: The LHA Strategy The Contract Management Option Secondary PowerPlays: The Slice & Dice The iMoc The Instalment Contract The Corporate Option sMOC The Sandwich Option The Holiday Option Other Possible Combinations:

The Managed Option Contract The Managed Option Contract The Slice & Dice

The LHA Strategy The Contract Management The iMoc sMOC

5 Lease Option PowerPlays

QuickRef

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51 Property Options PowerPlays
Quick Reference
What Is The Situation? You've Seen A Property That Requires A Full Refurbishment Before It Can Be Let

Primary PowerPlays: The Ugly Duckling The Sweat Equity Option The Builder's Bum Option Secondary PowerPlays: The Slice & Dice Divide & Conquer Option The Yin Yang Option The Option Swap The iMoc The Instalment Contract The Option Lead Flip The Assignable MOC The Equity Split Option The Sandwich Option Other Possible Combinations:

The Option Flip The Builder's Bum Option The Builder's Bum Option

The Builder's Bum Option The Sandwich Option The Yin Yang Option

5 Lease Option PowerPlays

QuickRef

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Quick Reference
What Is The Situation? The Mortgage Is In Arrears And The Bank Is About To Repossess The Property

Primary PowerPlays: The Option Flip sMOC The iMoc Secondary PowerPlays: The Managed Option Contract The Classic Moc Multiplier The Option Swap The iMoc The Contract Management Option The Corporate Option sMOC The Option Lead Flip The Assignable MOC The Equity Split Option The Sandwich Option The LHA Strategy The Holiday Option Other Possible Combinations:

The iMoc The iMoc

sMOC sMOC

The LHA Strategy The Classic Moc Multiplier

5 Lease Option PowerPlays

QuickRef

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51 Property Options PowerPlays
Quick Reference
What Is The Situation? Your Property Won't Generate Enough Rent As A Single Family Let

Primary PowerPlays: The Classic Moc Multiplier The LHA Strategy The Sandwich Option Secondary PowerPlays: The Option Flip The Sweat Equity Option The Subsidised Option The Cashback Option The Mission Impossible Option The Yin Yang Option The Option Swap The iMoc The Contract Management Option The Corporate Option sMOC The Option Lead Flip The Assignable MOC The Equity Split Option The Sandwich Option Other Possible Combinations:

The iMoc The iMoc The Builder's Bum Option

sMOC sMOC The Slice & Dice

The LHA Strategy The Classic Moc Multiplier

5 Lease Option PowerPlays

QuickRef

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5 Lease Option PowerPlays

51 Property Options PowerPlays
Quick Reference
What Is The Situation? You Have A Property That Is Difficult To Manage

Primary PowerPlays: The Sale Option The Sandwich Option The Option Flip Secondary PowerPlays: The Sweat Equity Option The Option Swap The Instalment Contract The Contract Management Option The Option Lead Flip The Assignable MOC The Equity Split Option The LHA Strategy Other Possible Combinations:

The Option Flip The Option Lead Flip

The LHA Strategy The LHA Strategy

The Option Lead Flip

5 Lease Option PowerPlays

QuickRef

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5 Lease Option PowerPlays

51 Property Options PowerPlays
Quick Reference
What Is The Situation? The Value Of Your Property Is Too High For A Standard Buy To Let

Primary PowerPlays: The Option Flip The Yin Yang Option Secondary PowerPlays: The Option Swap The Instalment Contract The S&D Keep Strategy The Pension Plan Strategy The Storage Millionaire Other Possible Combinations:

The Option Flip The Option Swap The Instalment Contract

The Builder's Bum Option The Yin Yang Option The S&D Keep Strategy

The Option Swap The Option Flip

5 Lease Option PowerPlays

QuickRef

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51 Property Options PowerPlays
Quick Reference
What Is The Situation? You've Found Some Land Which Has Development Potential

Primary PowerPlays: The Quick Land Value Creator

Secondary PowerPlays: The Development Option The JV Profit Builder Build To Keep Option The Storage Millionaire The Car Park Option Other Possible Combinations:

The Quick Land Value Creator The Quick Land Value Creator

The Storage Millionaire The Development Option

Build To Keep Option The Car Park Option

5 Lease Option PowerPlays

QuickRef

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51 Property Options PowerPlays
Quick Reference
What Is The Situation? Your Vendor Has A Shop He/She Wants To Rent Out

Primary PowerPlays: The Commercial Lease Option

Secondary PowerPlays: The Commercial Cashflow Lease Option The Commercial Sublease Multiplier The Commercial Option Flip The Simple Switch Option Other Possible Combinations:

The Commercial Lease Option The Commercial Lease Option

The Commercial Sublease The Simple Switch Option

5 Lease Option PowerPlays

QuickRef

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51 Property Options PowerPlays
Quick Reference
What Is The Situation? You've Found A Large Site Which Is Currently Empty And The Landowner Receives No Income From It.

Primary PowerPlays: The Storage Millionaire The Car Park Option Secondary PowerPlays: The Quick Land Value Creator The Development Option The JV Profit Builder Build To Keep Option Other Possible Combinations:

The Storage Millionaire The Car Park Option

The Quick Land Value Creator The Quick Land Value Creator

The JV Profit Builder The JV Profit Builder

The Development Option Build To Keep Option

5 Lease Option PowerPlays

QuickRef

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51 Property Options PowerPlays
Quick Reference
What Is The Situation? Your Vendor Wants To Give You A Long-Term Lease But Without The Option To Buy

Primary PowerPlays: The Guaranteed Rental Scheme

Secondary PowerPlays:

Other Possible Combinations:

5 Lease Option PowerPlays

QuickRef

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51 Property Options PowerPlays
Quick Reference
What Is The Situation? You Have A Retiring Landlord Who Wants To Sell His Portfolio.

Primary PowerPlays: The Portfolio Split Option The Instant Portfolio Stacker Secondary PowerPlays: Repackaged Portfolios

Other Possible Combinations:

5 Lease Option PowerPlays

QuickRef

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5 Lease Option PowerPlays

51 Property Options PowerPlays
Quick Reference
What Is The Situation? Your Vendor Wants To Sell The Property Now. He Does Not Want To Give An Option.

Primary PowerPlays: No Money Down Option

Secondary PowerPlays: The Trust Deed Option

Other Possible Combinations:

5 Lease Option PowerPlays

QuickRef

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51 Property Options PowerPlays
Quick Reference
What Is The Situation? You Come Across A Development Of Apartments In A City Centre That No-One Wants. What Do You Do?

Primary PowerPlays: The Virtual Hotel Option

Secondary PowerPlays: The Sandwich Option No Money Down Option The Equity Split Option The Portfolio Split Option Repackaged Portfolios Other Possible Combinations:

The Virtual Hotel Option

The Sandwich Option

Repackaged Portfolios

5 Lease Option PowerPlays

QuickRef

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5 Lease Option PowerPlays

51 Property Options PowerPlays
Quick Reference
What Is The Situation? You Have An Option That's Due To Expire & You Can't Get A Mortgage Right Now. What Do You Do?

Primary PowerPlays: Supermum Option

Secondary PowerPlays: The Trust Deed Option No Money Down Option Other Possible Combinations:

5 Lease Option PowerPlays

QuickRef

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5 Lease Option PowerPlays

51 Property Options PowerPlays
Quick Reference
What Is The Situation? You Have A Piece Of Land That Is Refused Planning Permission To Develop Into Flats

Primary PowerPlays: The Storage Millionaire

Secondary PowerPlays: The Car Park Option

Other Possible Combinations:

5 Lease Option PowerPlays

QuickRef

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51 Property Options PowerPlays
Quick Reference
What Is The Situation? You Have A Property That Needs Work

Primary PowerPlays: The Sweat Equity Option

Secondary PowerPlays: The Option Flip The Ugly Duckling The Yin Yang Option The Sale Option The Option Swap Other Possible Combinations:

The Sweat Equity Option The Option Swap

The Option Swap The Yin Yang Option

The Builder's Bum Option The Sweat Equity Option

The Ugly Duckling

5 Lease Option PowerPlays

QuickRef

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51 Property Options PowerPlays
Quick Reference
What Is The Situation? Your Seller Is Only Willing To Allow You A Short Option Contract (i.e. 6-9 months)

Primary PowerPlays: The Option Flip

Secondary PowerPlays: The Ugly Duckling The Commercial Option Flip The Builder's Bum Option The Option Lead Flip Other Possible Combinations:

The Ugly Duckling The Option Flip

The Builder's Bum Option The Option Lead Flip

5 Lease Option PowerPlays

QuickRef

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51 Property Options PowerPlays
Quick Reference
What Is The Situation? Your Seller Wants Some Money Upfront Right Now

Primary PowerPlays: The Vendor Double Dip Option

Secondary PowerPlays: The Managed Option Contract The Sale Option The Instalment Contract Other Possible Combinations:

5 Lease Option PowerPlays

QuickRef

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5 Lease Option PowerPlays

Option PowerPlay 2 : The Managed Option Contract
The Managed Option Contract

Situation Where This Strategy Can Be Used
Someone calls you with a problem. They have a 3-bed semi-detached that has been on the market for over a year and all the while they’ve been making the mortgage payments on it. They moved out of the house 6 months ago having recently separated from each other. Your sellers have already bought other houses, but can no longer afford to make mortgage payments on both houses. It’s just way too much for them. They’re extremely frustrated and are considering handing the keys back to the bank! This scenario calls for you – the investor – to take over the mortgage payments on this property and agree to buy the house from the seller at a fixed price any time within the next 10 years. During that time the market may have doubled. So in 10 years’ time you’d have the option to buy this house for 50% of its market value THEN. In the meantime you could rent out the house at a profit as the monthly mortgage payments are much lower than the rent achievable on this property. Other investors would walk away from this opportunity, leaving you to pick up great properties in great areas that have fallen 20%-25% in value from their peak, rent out at a profit & buy the property on the cheap in 10 years’ time. This calls for the Managed Option Contract (the MOC) Let’s see how this all fits together:-

Step 1 : How To Source Deal
Note that here the seller is motivated by the fact that they just can’t sell the property, so they’re stuck paying the mortgage on a property they no longer want. They may not have significant equity in the property for a 30% Below Market Value deal and so they have very limited options. You can find these motivated sellers by :Many of the sourcing mechanisms highlighted in Volume 2: Section 5 are relevant: Leaflet advertising Court repossession lists Estate agents
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The Managed Option Contract

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Internet advertising etc… Responding To Newspapers Ads Tired Landlords (Full details of sourcing available in Volume 2: Section 5 )

Step 2 : Value The Deal Properly
The property would be valued by using our 16 Step Valuation Process as highlighted in Volume 2: Section 7.

Step 3 : Check Out The Deal Properly
Use the checklist in the “check out the deal section” this is very important in this strategy especially the following sections. 1. Whose name is on title? It is important to make sure you are dealing with the actual owners of the property, and also that you are dealing with all owners. So, for, example if the husband and wife are both on the title deeds then make sure you get them both to sign the heads of terms. 2. Which company has the mortgage? This is important since you should know which mortgage company you are dealing with as you may need to get consent to let from them. 3. What is the amount left on the mortgage? You need to make sure that this amount is less than the price you agree to buy the property from them for. 4. Any early redemption penalties? Check to see if there are any early redemption penalties. You would normally want to run these down before exercising your option. 5. Any arrears on the property? These would need to be taken into consideration as well. 6. Any other secured loans on property? This is very important and is often missed by investors . Any other loans secured against the property would also need to be cleared when you exercise your option so the total for redeeming all loans and mortgages and restrictions would need to be less than the purchase price of the option. 7. Any other restrictions? Check to see if there are any other restrictions on the property. 8. Total amount owing on property less than the purchase price in the option? Make sure that the purchase price in the option is able to pay off all the loans outstanding and any restrictions on the property. Otherwise you will not be able to exercise the option since you will not be able to remove all the loans from the title register.
5 Lease Option PowerPlays

The Managed Option Contract

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9. Seller not bankrupt? Check that the seller is not bankrupt. This can be done by running a bankruptcy search. Also check that he is not about to be declared bankrupt as this would complicate your option. It is often advisable to get a Debt Management Company that specialises in and understands lease options for example Express Money Solutions to put your client into a debt plan of some sort. 10. Property in flood zone? Make sure that the property is not in a flood zone as otherwise you will find it difficult to get insurance and to get a mortgage if you decide to buy later on. As with any problem there is also an opportunity and it may be possible to get properties on options with the intent of just getting cash flow each month so long as you can get some insurance, even if it is very high or has a very high excess. 11. Use Upmystreet and other property portals to check if property area is ok. Remember property investing is all about location, location, location. This is very important to the long term value of the property, and these property portals allow you to check local information about the area such as the crime rate, unemployment rate and many other factors. 12. Carry out searches We would recommend you always carry out searches on the property, and this is vital if you are either paying a large option fee or carrying out a lot of refurbishment works on the property. 13. Do a background check on property It is worth doing background checks on the property itself. It may be cheap because something has happened at the property, maybe someone was killed in the property or it’s haunted. This may have an adverse affect on the value of the property. 14. Is the property mortgageable? Make sure the property is of traditional construction and therefore mortgageable. Many properties have been built using non-standard construction. Although in the past it would have been possible to obtain mortgages, you would struggle to find a lender for these now. 15. Are there any unsecured loans? Although strictly this is not a problem on the deal, if you do not look at all the finances of your seller, you may find that they become bankrupt and this would have some impact on your option. Many of the PowerPlays here mitigate this but it would be better to get the seller onto a debt plan with a debt management company that fully understands the process of options for example Express Money Solutions.

Step 4: Negotiate The Deal & Get Signed Heads Of Terms
Use the checklist in the Negotiating Section. Special reference is made to the following as they are specific to this PowerPlay. Purchase Price Of Property Remember that this needs to be a price that will be more than all the redemption figures and any debt owed by the sellers that are registered on the property. There is simply no point in you
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The Managed Option Contract

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5 Lease Option PowerPlays
negotiating an amount lower than the redemption figures as the seller will not be able to sell the house unless they have other money that they can use to pay off some of the loans. SECRET TIP: Convince the seller that they should pay at least the next mortgage payment while the legal process goes through. That should give you enough time to put a tenant into the property. Price Of Option (Option Fee ) £1 Length Of The Option Term Make sure you get a minimum term of 5 years (preferably 7 years, ideally 10 years). You are hoping for the market to increase over time to allow the property to appreciate before you buy the property. The longer the option period the more likely the property will appreciate in value and hence the greater the profit. You will also have more options for your exit strategy. Right To Extend The Option Agreement You will keep the right to extend the option for another year by making a further payment of perhaps £1k. You will keep paying the monthly repayments to the lender. Right To Assign The Option Agreement This needs to be there otherwise you cannot sell on your option and thus the property. Right To Enter The Property Make sure you have the right to enter property to show potential tenants before the option is granted. Right To Place A Restriction On The Property With The Land Registry Make sure your solicitors register a restriction for the option with the land registry. Buildings Insurance You will want to add your name to the seller’s building insurance and also ensure that the buildings insurance covers you letting the property out to the kinds of tenants that you want to rent to.

Step 5 How To Find A Tenant
Use a lettings agency to find a tenant. Find a lettings agency that advertises on Rightmove, but also don’t forget Primelocation, PropertyFinder, FindAProperty, Globrix & Zoopla. SECRET TIP: Get the property advertised on Gumtree or Vivastreet in order to find a good tenant.

An Example With The Numbers.
Assumptions In this example the cost of the option is £1!
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Market Value Total Mortgage: Option Purchase Price of Property £100,000 £90,000 £90,000

Price of Option

£1

Current Mortgage Market Rent Length Of The Option Agreement

£300 per calendar month £550 10 Years

Right To Extend The Option Agreement

1 Year

Estimated Value In 10 Years Upfront Profit Cashflow During Option Term

£200,000 0 £550 rent - £300 mortgage = £250 pcm X 12 months = £3,000 per annum X 10 years = £30,000

Back End Profit

£200,000 new value - £90,000 purchase price = £110,000 profit

Total Profit

£110,000 + £30,000 = £140,000

As can be seen from the example above, a profit of £250 per calendar month is made and the total cost of money put into the deal was £1. The total profit here is £140k, which is not bad for a property that all the other investors walked away from. The Managed Option Contract forms the basis to lease options in the UK and as you have seen, this PowerPlay alone would earn you over £100,000 in profit.
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The Managed Option Contract

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Be sure to use the QuickRef to look at how to use this strategy with some of the other PowerPlays. Although the 5 PowerPlays presented here are magic, imagine what you could do with all 51 PowerPlays at your disposal in terms of the deals you could structure! How much cash would they net you? What combinations of PowerPlays could you thread together to become a truly maverick property investor. Imagine how much more successful you’ll be when you buy the full 51 Property Option PowerPlays – the 500 page 2 Volume Advanced Technical Manual for the full set of nuances and flavours that you can implement to extract the maximum cash out of your property deals. The 2 –Volume Set is only available on limited release so make sure we have your details here:-

www.LeaseOptionPowerPlays.com.

5 Lease Option PowerPlays

The Managed Option Contract

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5 Lease Option PowerPlays

Strategy 2 The Managed Option Contract HEADS OF TERMS
Grant of an Option to Investor by Owner
Owner’s Name: Mr Investor’s Name: Property Address: Purchase Price:

John Smith and Mrs Mary Smith Mr Mark Moneymaker 12 Market Road, Manchester, M1 2AB £90,000.00

Owner’s correspondence address if different from the above: N/A Owner to be legally represented:

Y

If yes, provide details of Solicitors acting: TBC Option Period: Estimated Start Date:

120 months in 2 weeks time £1.00 once the monthly mortgage

Investor to pay Owner any fee to the Seller:

Amount payable to Owner’s Mortgage Lender per month: whatever

payments are - currently £300.00 pcm
Amount payable to Owner’s Mortgage Lender: £90,000.00…….. Amount payable to Owner’s Buildings Insurer: Payable to Owner’s Second Lender: N/A Payable to Mgt Company:

£150.00

N/A Bank
Account No:

Owner’s Mortgage Lender Name: Natwest
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1 Natwest House, East Lane, London, NW11 2AB .............
Account No: _____________

Address:

Owner’s Second Lender’s Name: Address:

___________________________________________________

Owner’s Third Lender’s Name:........... Account No: _____________ Address: ___________________________________________________

Building Insurer Name: _______________________ Policy No:_________________ Address: ___________________________________________________

Mgt Company (if Leasehold): ____________________________________________ Address: ___________________________________________________

Terms of Payment
Any other period payment to be made to Owner £ week/month/year every

Any extra term: right

to extend option for a further 12 months, extension fee =

£1,000.00
_____________________________________ Signed by Owner _____________________________________ Signed by Investor

Date:_________________

Date:________________

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Option PowerPlay 3 : The Ugly Duckling
Using An Option To Buy An Unmortgageable Property (nonstructural) Situation Where This Strategy Can Be Used
A seller calls you wanting to sell a house they’ve inherited that they’ve been trying to sell for months. They’re a little embarrassed as the house needs a lot of work and they can’t see why anybody would want the house, or want to do the work. They don’t want the property, or the problem – they just want to get rid of it – and bring closure to this chapter of their lives. When you see the property, the first thing you see is that nobody could live there. Although the seller had correctly described the property as ‘needing a lick of paint’, you see, critically that there is no kitchen or bathroom. Although the house may not be in any need of structural work, the fact that there is no kitchen or bathroom means the property is unmortgageable and that explains why it hasn’t sold for so long. What this does is to severely restrict the number of buyers able to take on this challenge. If the seller were to put the property on the market with an estate agent, the estate agent would sell it through one of their investor friends. The lack of bank finance limits the sale ability of this property to only investors with cash, investors able to borrow ‘hard money’, or residential buyers with cash – who also like doing up properties. However, the best idea here is for you to take a short option to buy the property with the right to carry out works during the option period. The seller will pay the mortgage in the meantime (if there is one) and you will do the property up and then sell it. You might have to offer to pay the mortgage payments but if this is a probate property, the payments may be minimal. The beauty about transforming this ugly duckling is that you will be able to control the property with very little of your own money and then sell it at a much higher price due to the increased value of the property. What we love about these types of properties is that you can add value to the sellers’ lives and also add value to the property for maximum profit. Note that in order to achieve the best price you will have to use an aggressive marketing campaign, and stage the property for sale – which is different to just renting the property out. These are the two beauties of this PowerPlay:1. Usually you would not be able to buy the property and sell it within 6 months as the Council of Mortgage Lenders (CML) stipulate that the previous owner must have owned the property for 6 months. Using an option agreement, the previous owner would have still owned it for 6 months, as it would be the original vendor selling directly to the buyer, under your instructions, giving you no problems when selling the property on. The 6 months rule doesn’t apply if the sellers have inherited the property. 2. You will sell the property at a much higher price having never owned it.
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You can make a lot of cash in a short amount of time using this PowerPlay. In addition, your seller will be delighted as you have taken their problem away from them! Let’s see how this breaks down:-

Step 1 : How To Source Deal
Note that here the seller is motivated by the fact that they have a problem property they could do without. They consider the state of the property leaves them with quite limited options. You can find these motivated sellers by :Many of the sourcing mechanisms highlighted in Volume 2: Section 5 are relevant: Leaflet advertising Court repossession lists Estate agents Internet advertising etc… Tired Landlords (Full details of sourcing available in “Volume 2: Section 5” )

Step 2 : Value The Deal Properly
The property would be valued by using our 16 Step Valuation Process as highlighted in Volume 2: Section 7.

Step 3 : Check Out The Deal Properly
Use the checklist in the “check out the deal section” this is very important in this strategy especially the following sections. 1. Whose name is on title? It is important to make sure you are dealing with the actual owners of the property, and also that you are dealing with all owners. So, for, example if the husband and wife are both on the title deeds then make sure you get them both to sign the heads of terms. 2. Which company has the mortgage? This is important since you should know which mortgage company you are dealing with as you may need to get consent to let from them. 3. What is the amount left on the mortgage? You need to make sure that this amount is less than the price you agree to buy the property from them for. 4. Any early redemption penalties? Check to see if there are any early redemption penalties. You would normally want to run these down before exercising your option.
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5. Any arrears on the property? These would need to be taken into consideration as well. 6. Any other secured loans on property? This is very important and is often missed by investors . Any other loans secured against the property would also need to be cleared when you exercise your option so the total for redeeming all loans and mortgages and restrictions would need to be less than the purchase price of the option. 7. Any other restrictions? Check to see if there are any other restrictions on the property. 8. Total amount owing on property less than the purchase price in the option? Make sure that the purchase price in the option is able to pay off all the loans outstanding and any restrictions on the property. Otherwise you will not be able to exercise the option since you will not be able to remove all the loans from the title register. 9. Seller not bankrupt? Check that the seller is not bankrupt. This can be done by running a bankruptcy search. Also check that he is not about to be declared bankrupt as this would complicate your option. It is often advisable to get a Debt Management Company that specialises in and understands lease options for example Express Money Solutions to put your client into a debt plan of some sort. 10. Property in flood zone? Make sure that the property is not in a flood zone as otherwise you will find it difficult to get insurance and to get a mortgage if you decide to buy later on. As with any problem there is also an opportunity and it may be possible to get properties on options with the intent of just getting cash flow each month so long as you can get some insurance, even if it is very high or has a very high excess. 11. Use Upmystreet and other property portals to check if property area is ok. Remember property investing is all about location, location, location. This is very important to the long term value of the property, and these property portals allow you to check local information about the area such as the crime rate, unemployment rate and many other factors. 12. Carry out searches We would recommend you always carry out searches on the property, and this is vital if you are either paying a large option fee or carrying out a lot of refurbishment works on the property. 13. Do a background check on property It is worth doing background checks on the property itself. It may be cheap because something has happened at the property, maybe someone was killed in the property or it’s haunted. This may have an adverse affect on the value of the property. 14. Is the property mortgageable? Make sure the property is of traditional construction and therefore mortgageable. Many properties have been built using non-standard construction. Although in the past it would have been possible to obtain mortgages, you would struggle to find a lender for these now.

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15. Are there any unsecured loans? Although strictly this is not a problem on the deal, if you do not look at all the finances of your seller, you may find that they become bankrupt and this would have some impact on your option. Many of the PowerPlays here mitigate this but it would be better to get the seller onto a debt plan with a debt management company that fully understands the process of options for example Express Money Solutions.

Step 4: Negotiate The Deal & Get Signed Heads Of Terms
Use the checklist in the Negotiating section, special reference is made to the following as they are specific to this strategy. Purchase Price Of Property Remember that this needs to be a price that will be more than all the redemption figures. There is no point in you negotiating lower than the redemption figures as the seller will not be able to sell the house unless they have other money that they can use to pay off some of the loans. Make sure you take into consideration all the costs for refurbishing the house and all selling costs i.e. estate agents/solicitors. SECRET TIP: In addition to carrying out the refurbishment, do stage the house for sale as this dramatically increases the wow-factor when sellers come to look around the house. You want potential buyers to feel they are already living there, so put out towels in the bathroom, toilet paper in the toilet, set places at the kitchen table as if they are already living there. Make sure the front of the house is inviting people in! Price Of The Option (Option Fee) Try to set this as low as possible (£1) by saying that you will be refurbishing it for them! So if you decide not to go ahead with the purchase then they have a house in better condition that is worth a lot more. Length Of The Option Term. Make sure you get at least 9 months as it will take 2-3 months to do the work and then 6 months to sell it. Right To Extend The Option Agreement We keep the right to extend the option for another 6 months by making a further payment, for instance this could be £1,000. Right To Assign The Option Agreement This needs to be there otherwise you cannot sell on your option and thus the property if this is what you choose to do. Right To Enter The Property Make sure you have the right to enter property to show potential buyers. Right To Place A Restriction On The Property With The Land Registry. Make sure you register the option with Land Registry as you will be spending a significant amount of money doing the property up!
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Buildings Insurance You should take out new policy insurance on this property to protect yourself as you will spend £10,000 doing it up.

Step 5 How To Find A Buyer
For this type of option it is easiest to sell the house through estate agents, I would also give the following incentives:    Sell at a slight discount to market value Offer a 5% vendor’s gifted deposit. Offer to pay the stamp duty (if applicable) Refer to Volume 2: Section 8 on Marketing Your Property for full details.

SECRET TIP: Offer other incentives to your buyer. Offer to pay their solicitor’s fees and their removal costs as these incentives do not need to be reported to the bank and they are mortgage-friendly. SECRET TIP: When selling, offer the estate agent an incentive so that if they manage to sell for the amount you want and completion happens within 2 months, then they will get an extra £500, and if completion happens after, they will just receive their normal selling commission. SECRET TIP: Get the builder to finance the refurb in exchange for a higher fee when the property sells. Doing things this way you will have virtually no upfront fees.

An Example With The Numbers.
Assumptions In this example the cost of the option is £1! Market Value (pre-refurb) Option Purchase Price Of Property N/A £140,000

Market Value (post-refurb) Price Of Option

£210,000 £1

Length Of The Option Agreement

9 months

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Right To Extend The Option Agreement 6 months

Selling Price Refurbishment Cost Upfront: During: Back End:

£200,000 £10,000 £0 £0 £200,000 New Value - £10,000 refurb £140,000 Purchase Price

= £50,000 Total Profit: £50,000

As can be seen from the example above, a profit of £50,000 is made before tax and the total cost of money put into the deal was £1 (plus the £10,000 for the refurb). This doesn’t take into account the capital appreciation of the property. This is a perfect example of being able to earn a good yearly income from just 1 deal within 6 months. You could put 20% of the profit in to fund your marketing budget for a whole year netting lots more jaw-dropping deals and locking in lots more profit. Be sure to use the QuickRef to look at how to use this strategy with some of the other PowerPlays. Although the 5 PowerPlays presented here are magic, imagine what you could do with all 51 PowerPlays at your disposal in terms of the deals you could structure! How much cash would they net you? What combinations of PowerPlays could you thread together to become a truly maverick property investor. Imagine how much more successful you’d be when you purchase the full 51 Lease Option PowerPlays – the 500 page 2 Volume Advanced Technical Manual. For the full set of nuances and flavours that you can implement to extract the maximum cash out of your property deals. The 2 –Volume Set is only available on limited release so make sure we have your details here:-

www.LeaseOptionPowerPlays.com.

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Strategy 3 The Ugly Duckling HEADS OF TERMS
Grant of an Option to Investor by Owner
Owner’s Name(s): Investor’s Name: Property Address: Purchase Price:

Mr John Smith and Mrs Mary Smith Mr Mark Moneymaker 12 Market Road, Manchester, M1 2AB £140,000.00

Owner’s correspondence address if different to the above: N/A Owner to be legally represented: Y

If yes, provide details of Solicitors acting or TBC: ……TBC…………………………….. Option Period: Estimated Start Date:

9 months in 2 weeks time £1.00 once

Investor to pay Owner any fee to the Seller:

Amount payable to Owner’s Mortgage Lender per month: N/A Amount payable to Owner’s Mortgage Lender: £60,000.000…….. Amount payable to Owner’s Buildings Insurer: Payable to Owner’ Second Lender: Payable to Mgt Company:

£210.00

N/A

N/A Bank
Account No:

Owner’s Mortgage Lender’s Name: Natwest Address:
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1 Natwest House, East Lane, London, NW11 2AB
The Ugly Duckling

5 Lease Option PowerPlays
.............

Owner’s Second Lender’s Name: Address:

Account No: _____________

___________________________________________________

Owner’s Third Lender’s Name:........... Account No: _____________ Address: ___________________________________________________

Buildings Insurer’s Name: _______________________ Policy No:_________________ Address: ___________________________________________________

Mgt Company (if Leasehold): ____________________________________________ Address: ___________________________________________________

Terms of Payment
Any other period payment to be made to Owner £ week/month/year every

Any extra term: right

to extend option for a further 6 months, extension fee =

£1,000.00
_____________________________________ Signed by Owner _____________________________________ Signed by Investor

Date:_________________

Date:________________

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Option PowerPlay 6 : Divide & Conquer
Using An Option To Buy, Split The Garden and Get Planning Permission To Build Another House Situation Where This Strategy Can Be Used
You have a seller who owns a 3-Bed Detached house on a corner plot with gardens to the back and side of it. When you go to see the property you realise that there is enough land to build at least two more 3-Bed semi-detached houses to the side of the house. The seller knows that the land to the side is attractive to an investor. The key thing here is that many developers or investors may not be willing to build right now as we are not at that point in the property cycle that features a rapidly rising market. However, there is still the opportunity to use an option to make a lot of cash in a very short space of time. Using the Divide & Conquer Option gives you control over the whole plot of land and this strategy is another classic PowerPlay. Having made preliminary enquiries with the planning department to ensure that they wouldn’t necessarily rule out giving planning permission, you will take the property on an option. The seller will stay in the house and continue to pay the mortgage – this will give you 3 months to get outline planning permission to build the two 3-bed semis in the back garden. On gaining planning permission, you will then split the title with the original house on one title and the land with the planning permission on the other. You will then sell the house to a normal buyer and sell the land with planning permission to a developer. Let’s explore how this all works:-

Step 1 : How To Source Deal
The seller may or may not be heavily motivated. What drives this deal for you is the value that you can add to the property rather than the price that you are able to secure the property for (although this is still important). You can find these motivated sellers by :Many of the sourcing mechanisms highlighted in Volume 2: Section 5 are relevant: Leaflet advertising Estate agents
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Internet advertising etc… (Full details of sourcing available in Volume 2: Section 5)

Step 2 : Value The Deal Properly
The property would be valued by using our 16 Step Valuation Process as highlighted in Volume 2: Section 7. There are a few things that you will need to look out for. Of course you will need to check values of 3-bed semi detached houses that are similar to the ones that you intend to get outline planning permission for. This defines what this plot is worth to a potential developer. You will need to look out for the building line for the road around the corner. You will need to ensure that the water mains do not cross the plot for which you are intending to get planning permission. Let’s assume the property is worth £200,000. The seller has been trying to sell for some time unsuccessfully and so you manage to secure an option agreement on this property for £175,000. Having already made preliminary enquiries with the planning department to ensure that they wouldn’t necessarily rule out giving planning permission, you decide to take on the option. The seller would stay in the house and continue to pay the mortgage and you would spend 3 months getting outline planning permission to build two 3-bed semis each worth £150,000. Each plot of land for each house with planning permission would then be worth £50,000 (each). You would sell the existing house to anybody for just £150,000 – a ‘loss’ of £25,000. But since you would make £100,000 for the plots of land with planning permission, overall you would make a profit of £75,000.

Step 3 : Check Out The Deal Properly
Use the checklist in the “check out the deal section” this is very important in this strategy especially the following sections. 1. Whose name is on title? It is important to make sure you are dealing with the actual owners of the property, and also that you are dealing with all owners. So, for, example if the husband and wife are both on the title deeds then make sure you get them both to sign the heads of terms. 2. Which company has the mortgage? This is important since you should know which mortgage company you are dealing with as you may need to get consent to let from them. 3. What is the amount left on the mortgage? You need to make sure that this amount is less than the price you agree to buy the property from them for.
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4. Any early redemption penalties? Check to see if there are any early redemption penalties. You would normally want to run these down before exercising your option. 5. Any arrears on the property? These would need to be taken into consideration as well. 6. Any other secured loans on property? This is very important and is often missed by investors . Any other loans secured against the property would also need to be cleared when you exercise your option so the total for redeeming all loans and mortgages and restrictions would need to be less than the purchase price of the option. 7. Any other restrictions? Check to see if there are any other restrictions on the property. 8. Total amount owing on property less than the purchase price in the option? Make sure that the purchase price in the option is able to pay off all the loans outstanding and any restrictions on the property. Otherwise you will not be able to exercise the option since you will not be able to remove all the loans from the title register. 9. Seller not bankrupt? Check that the seller is not bankrupt. This can be done by running a bankruptcy search. Also check that he is not about to be declared bankrupt as this would complicate your option. It is often advisable to get a Debt Management Company that specialises in and understands lease options for example Express Money Solutions to put your client into a debt plan of some sort. 10. Property in flood zone? Make sure that the property is not in a flood zone as otherwise you will find it difficult to get insurance and to get a mortgage if you decide to buy later on. As with any problem there is also an opportunity and it may be possible to get properties on options with the intent of just getting cash flow each month so long as you can get some insurance, even if it is very high or has a very high excess. 11. Use Upmystreet and other property portals to check if property area is ok. Remember property investing is all about location, location, location. This is very important to the long term value of the property, and these property portals allow you to check local information about the area such as the crime rate, unemployment rate and many other factors. 12. Carry out searches We would recommend you always carry out searches on the property, and this is vital if you are either paying a large option fee or carrying out a lot of refurbishment works on the property. 13. Do a background check on property It is worth doing background checks on the property itself. It may be cheap because something has happened at the property, maybe someone was killed in the property or it’s haunted. This may have an adverse affect on the value of the property.
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14. Is the property mortgageable? Make sure the property is of traditional construction and therefore mortgageable. Many properties have been built using non-standard construction. Although in the past it would have been possible to obtain mortgages, you would struggle to find a lender for these now. 15. Are there any unsecured loans? Although strictly this is not a problem on the deal, if you do not look at all the finances of your seller, you may find that they become bankrupt and this would have some impact on your option. Many of the PowerPlays here mitigate this but it would be better to get the seller onto a debt plan with a debt management company that fully understands the process of options for example Express Money Solutions.

Step 4: Negotiate The Deal & Get Signed Heads Of Terms
Use the checklist in the Negotiating Section. Special reference is made to the following as they are specific to this strategy. Purchase Price Of Property Remember that this needs to be a price that will be more than all the redemption figures. There is no point in you negotiating lower than the redemption figures as the seller won’t be able to sell the house unless they have other money that they can use to pay off some of the loans. Price Of The Option (Option Fee) Try to set this to as low as possible (£1) as there will be a cost to gaining outline planning permission. Length Of The Option Term Make sure you get 12 months at the very minimum and try to negotiate a 6 month extension as it will take 3-6 months to get planning permission and another 6 months to sell the assets on. Right to Extend The Option Agreement As above try to negotiate a 6 month extension. Right To Assign The Option Agreement You will not be assigning the option agreement. Right To Enter The Property You may need access to sell the house to investors/first time buyers. Right To Place Restriction On Property With The Land Registry. If you are paying any significant amount for the option fee make sure you register the option with the Land Registry.

Step 5 How To Find a Buyer
SECRET TIP: You can post your plots on www.plotfinder.com in order to sell it to a developer.
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House Buyer: Market Through an Estate Agent Offer Incentives To The Buyers To Buy Plot Buyers: Local Small Developers Plot Websites/ Self Build Magazines

An Example With The Numbers.
Assumption: In this example the cost of the option is £1! Market Value Mortgage Option Purchase Price Of Property £200,000 £150,000 £175,000

Price Of Option

£1

Length Of The Option Agreement Right To Extend The Option Agreement Stamp Duty Upfront Profit: Profit During The Option Term:

12 months 6 months There is no stamp duty to pay. £0 Purchase Price Of House: £175,000 - Sale Of House: £150,000 = -£25,000 Subtotal: -£25,000 Plus: Sale Of Plot 1: £ 50,000 Sale Of Plot 2: £ 50,000 Subtotal: £100,000 Minus ‘loss’ on the house: (£-25,000) = £75,000

Total Profit:

£75,000

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This is another example of a PowerPlay where you stand to make £75,000 within 6 months of having done actually very little at all! Be sure to use the QuickRef to look at how to use this strategy with some of the other PowerPlays. Although the 5 PowerPlays presented here are magic, imagine what you could do with all 51 PowerPlays at your disposal in terms of the deals you could structure! How much cash would they net you? What combinations of PowerPlays could you thread together to become a truly maverick property investor. Imagine how much more successful you’ll be when you purchase the full 51 Lease Option PowerPlays – the 500 page 2 Volume Advanced Technical Manual for the full set of nuances and flavours that you can implement to extract the maximum cash out of your property deals. The 2 –Volume Set is only available on limited release so make sure we have your details here:-

www.LeaseOptionPowerPlays.com.

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Strategy 6 Divide & Conquer PowerPlay HEADS OF TERMS
Grant of an Option to Investor by Owner
Owner’s Names: Investor’s Name: Property Address: Purchase Price:

Mr John Smith and Mrs Mary Smith Mr Mark Moneymaker 12 Market Road, Manchester, M1 2AB £200,000.00

Owner’s correspondence address if different to the above: N/A Owner to be legally represented:

Y

If yes, provide details of Solicitors acting: TBC Option Period: Estimated Start Date:

12 months in 2 weeks time £1.00 once

Investor to pay Owner a fee:

Amount payable to Owner’s Mortgage Lender per month: N/A Amount payable to Owner’s Mortgage Lender: £150,000.00…….. Amount payable to Owner’s Buildings Insurer: Payable to Owner’s Second Lender: Payable to Mgt Company:
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N/A

N/A

N/A
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Owners Mortgage Lender’s Name: Natwest Address:

Bank

Account No:

A01235689

1 Natwest House, East Lane, London, NW11 2AB .............
Account No: _____________

Owner’s Second Lender’s Name: Address:

___________________________________________________

Owner’s Third Lender’s Name:........... Account No: _____________ Address: ___________________________________________________

Buildings Insurer’s Name: _______________________ Policy No:_________________ Address: ___________________________________________________

Mgt Company (if Leasehold): ____________________________________________ Address: ___________________________________________________

Terms of Payment
Any other period payment to be made to Owner £ week/month/year every

Any extra term: right

to extend option for a further 6 months, extension fee =

£1,000.00
_____________________________________ Signed by Owner _____________________________________ Signed by Investor

Date:_________________

Date:________________

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Option PowerPlay 45 : The Slice & Dice Pension Plan
Using An Option To Buy, Split Property Into Flats And Get A Property Mortgage Free Situation Where This Strategy Can Be Used
You have stumbled across a large property double-fronted Victorian house and are scratching your head about what you could do with it. The owner of the property is unable to sell for much less than the market value of the house. The house is worth £200k and their mortgage is £160k and they will need £25k to walk away with. As you are looking at the house you are trying to work out how to get the ‘highest and best use’ out of this house. You are aware that somehow it is possible to split – but are not so enthused about the prospect of turning it into a House Of Multiple Occupancy (HMO). You are also aware, based on LHA rents, that the LHA PowerPlay is not worthwhile. What you could do with this type of property is to split it into a number of flats. The combined value of these flats would be much more than the value of the house on its own. So what you will do here is to get an option on the house, get planning permission to convert the house into flats, convert the house into flats, create a freehold for the house and leaseholds for each flat, and then sell each flat on. However, there is a twist in the way that you do things here that turns this idea into the Pension Plan PowerPlay. You will then keep with the freehold which you will keep on a long term basis. The way this strategy works is as follows. You would follow these steps :1. Get an option on the property for at least 12 months Check with the local council duty planner to see if they would allow you to split the house into flats. There may be restrictions in place in that area. 2. Get planning permission to convert into flats Get a good architect to draw plans. Remember it’s not just the house as you also have to think about parking issues etc. but your architect will be able to help with that. 3. Do the conversion Get a builder to do the conversion and convert into apartments. 4. Find buyers Find buyers and sell the properties on. 5. Create the leases & exercise the option Get all the completions to take place on the same day with you buying the house from the seller and at the same time then selling on the new flats to the buyers.
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Let’s see how this all plays out:-

Step 1 : How To Source Deal
The seller is motivated by the fact that they cannot reduce the asking price of the property any further because of the mortgage on the property and the monthly mortgage is hurting them. You can find these motivated sellers by :Many of the sourcing mechanisms highlighted in Volume 2: Section 5 are relevant: Leaflets advertising Court repossession lists Estate agents Internet advertising etc… (Full details of sourcing available in “Volume 2: Section 5” )

Step 2 : Value The Deal Properly
The property would be valued by using our 16 Step Valuation Process as highlighted in Volume 2: Section 7. Please note that here you will need to value the property as a house first of all to satisfy yourself as to the equity (if any) left in the house. Then you will need to check the market value of flats and apartments in the local area. Only then will you be able to ascertain whether the conversion will stack up (and whether you will be able to borrow the money to carry out the conversion). For example in this area a double-fronted Victorian 4 bed semi-detached house is worth £200,000. You manage to source the property at 185,000 on an option agreement – so you have the right to buy this property for £185,000. You see that you can convert the house into four 1-bedroom flats at a cost of £10,000 per flat. So the total conversion will cost £40,000. The flats are then worth £100,000 each.

Step 3 : Check Out The Deal Properly
Use the checklist in the “check out the deal section” this is very important in this strategy especially the following sections. 1. Whose name is on title? It is important to make sure you are dealing with the actual owners of the property, and also that you are dealing with all owners. So, for, example if the husband and wife are both on the title deeds then make sure you get them both to sign the heads of terms.

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2. Which company has the mortgage? This is important since you should know which mortgage company you are dealing with as you may need to get consent to let from them. 3. What is the amount left on the mortgage? You need to make sure that this amount is less than the price you agree to buy the property from them for. 4. Any early redemption penalties? Check to see if there are any early redemption penalties. You would normally want to run these down before exercising your option. 5. Any arrears on the property? These would need to be taken into consideration as well. 6. Any other secured loans on property? This is very important and is often missed by investors . Any other loans secured against the property would also need to be cleared when you exercise your option so the total for redeeming all loans and mortgages and restrictions would need to be less than the purchase price of the option. 7. Any other restrictions? Check to see if there are any other restrictions on the property. 8. Total amount owing on property less than the purchase price in the option? Make sure that the purchase price in the option is able to pay off all the loans outstanding and any restrictions on the property. Otherwise you will not be able to exercise the option since you will not be able to remove all the loans from the title register. 9. Seller not bankrupt? Check that the seller is not bankrupt. This can be done by running a bankruptcy search. Also check that he is not about to be declared bankrupt as this would complicate your option. It is often advisable to get a Debt Management Company that specialises in and understands lease options for example Express Money Solutions to put your client into a debt plan of some sort. 10. Property in flood zone? Make sure that the property is not in a flood zone as otherwise you will find it difficult to get insurance and to get a mortgage if you decide to buy later on. As with any problem there is also an opportunity and it may be possible to get properties on options with the intent of just getting cash flow each month so long as you can get some insurance, even if it is very high or has a very high excess. 11. Use Upmystreet and other property portals to check if property area is ok. Remember property investing is all about location, location, location. This is very important to the long term value of the property, and these property portals allow you to check local information about the area such as the crime rate, unemployment rate and many other factors. 12. Carry out searches We would recommend you always carry out searches on the property, and this is vital if you
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are either paying a large option fee or carrying out a lot of refurbishment works on the property. 13. Do a background check on property It is worth doing background checks on the property itself. It may be cheap because something has happened at the property, maybe someone was killed in the property or it’s haunted. This may have an adverse affect on the value of the property. 14. Is the property mortgageable? Make sure the property is of traditional construction and therefore mortgageable. Many properties have been built using non-standard construction. Although in the past it would have been possible to obtain mortgages, you would struggle to find a lender for these now. 15. Are there any unsecured loans? Although strictly this is not a problem on the deal, if you do not look at all the finances of your seller, you may find that they become bankrupt and this would have some impact on your option. Many of the PowerPlays here mitigate this but it would be better to get the seller onto a debt plan with a debt management company that fully understands the process of options for example Express Money Solutions.

Step 4: Negotiate The Deal & Get Signed Heads Of Terms
Use the checklist in the Negotiating Section. Special reference is made to the following as they are specific to this strategy. Purchase Price Of Property Remember that this needs to be a price that will be more than all the redemption figures. There is no point in you negotiating lower than this as the seller will not be able to sell the house unless they have other money that they can use to pay of some off the loans. Make sure you take into consideration all the costs for refurbishing the house and all selling costs i.e. estate agents/solicitors. Price Of Option (Option fee) Try to set this as low as possible (£1) as you will still spend £40,000 converting the property. The property has no real value to anyone so the minimum option payment should be achievable. Length Of The Option Agreement. Make sure you get 12 months at the very minimum but try to negotiate a 6 month extension as it will take 3-6 months to do the work and you will want time to sell the flats on. Right To Extend The Option Agreement As above try to negotiate a 6 month extension. Right To Assign The Option Agreement You will not be assigning the option agreement. Right To Enter The Property Make sure you have the right to enter the property to carry out the development.
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Right To Place Restriction On Property With The Land Registry. You will be spending a significant amount on the refurbishment and therefore should have a restriction placed on the land registry

Step 5 How To Find Buyers
You will be selling these flats on once they have been created . You can sell off plan to buyers so that as soon as they are ready you can complete. You should use some of the basic incentives to help sell the flats:- Give a 5% discount - Pay any stamp duty if applicable - Carpet property - Removal costs - Part exchange with their existing house .

An Example With The Numbers.
Assumption In this example the cost of the option is £1! Market Value Option Purchase Price Of Property £200,000 £185,000

Price Of Option

£1

Length Of The Option Agreement

12 months

Right To Extend The Option Agreement

6 months

Upfront: Development:

£0 £10,000 x 4 flats = £40,000 Plans = £3.000 Total = £43,000

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Estate Agents: Solicitors Costs: Total selling price of flats Total cost of purchase £4,000 £5,000 £ 400,000 (100,000*4flats) £185,000 Purchase Price + £40,000 Development Costs +£5,000 Legal Fees +£4,000 Estate Agents +£3,000 Plans + £4,000 Mortgage Payments (10 months) = £240,000 £400,000-£240,000= £160,000 Still Own Freehold £250 Ground Rent x 4 = £1,000 p.a. Freehold Value = £20,000 Total Profit: £160,000+20,000=£180,000

Total Profit

So here, for simply spotting an opportunity and executing it well, you’ve been able to create £180,000 of profit within 12 months. Here you may have had to project manage the conversions, but by anybody’s calculations £180,000 profit on a single residential property worth £200,000 that you’ve never owned is an amazing profit. Be sure to use the QuickRef to look at how to use this strategy with some of the other PowerPlays. Although the 5 PowerPlays presented here are magic, imagine what you could do with all 51 PowerPlays at your disposal in terms of the deals you could structure! How much cash would they net you? What combinations of PowerPlays could you thread together to become a truly maverick property investor. Imagine how much more successful you’ll be when you purchase the full 51 Lease Option PowerPlays – the 500 page 2 Volume Advanced Technical Manual for the full set of nuances and flavours that you can implement to extract the maximum cash out of your property deals. The 2 –Volume Set is only available on limited release so make sure we have your details here:-

www.LeaseOptionPowerPlays.com.

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Strategy 45 The Slice & Dice Pension Plan HEADS OF TERMS
Grant of an Option to Investor by Owner
Owners’ Name(s): Investor’s Name: Property Address: Purchase Price:

Mr John Smith and Mrs Mary Smith Mr Mark Moneymaker 12 Market Road, Manchester, M1 2AB £185,000.00

Owner’s correspondence address if different from the above: N/A Owner to be legally represented:

Y

If yes, provide details of Solicitors acting: TBC Option Period: Estimated Start Date:

12 months in 2 weeks time £1.00 once the monthly mortgage

Investor to pay Owner a Fee:

Amount payable to Owner’s Mortgage Lender per month: whatever

payments are:currently £400.00 pcm
Amount payable to Owner’s Mortgage Lender: £150,000.00…….. Amount payable to Owner’s Buildings Insurer: Payable to Owner’s Second Lender: Payable to Mgt Company:
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£250.00

N/A

N/A
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Owners Mortgage Lender’s Name: Natwest Address:

Bank

Account No:

A01235689

1 Natwest House, East Lane, London, NW11 2AB .............
Account No: _____________

Owner’s Second Lender’s Name: Address:

___________________________________________________

Owner’s Third Lender’s Name:........... Account No: _____________ Address: ___________________________________________________

Building’s Insurer’s Name: _______________________ Policy No:_________________ Address: ___________________________________________________

Mgt Company (if Leasehold): ____________________________________________ Address: ___________________________________________________

Terms of Payment
Any other period payment to be made to Owner £ week/month/year every

Any extra term: right

to extend option for a further 6 months, extension fee =

£1,000.00
_____________________________________ Signed by Owner _____________________________________ Signed by Investor

Date:_________________

Date:________________

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Option PowerPlay 26 : The Storage Millionaire
Using A Lease Option Over Land And Rent It Out As A Container Site Situation Where This Strategy Can Be Used
You have a site that is a brownfield site that has either been previously redeveloped or perhaps previously used for industrial or commercial purposes. You have identified that because of the future plans for this town, this land will be an important strategic piece of land to own, even if it is not worthwhile developing right now. Currently there are lots of sites around the country where owners have got planning permission to build apartments, but because of the downturn in the market, developers are not interested in building right now. This is just part of the natural cyclical trend of property. What you want to do is to control this piece of land with an option to buy at today’s prices and then sell or build on it in a few years’ time when the market has recovered. So here’s the big question: How do you hold this land for those intervening years while you wait for the property market to recover? There are a number of PowerPlays you can use for example the carparking strategy but one of our favourites is The Storage Millionaire. The essence of The Storage Millionaire is that you get good income from the land for the next 3 or 4 years and then when the market recovers you either build or sell on the land to a developer. So you get cash flow now and you hopefully get potentially massive profits in the future too. The site you are looking for would generally be large, ½ an acre or more but it could be smaller. It would generally be a vacant land site although it could also be a derelict building with a large car park. Firstly, you would get an option over the land for the next 5-7 years minimum at close to today’s market value. You would also get a lease over the property for the same period of time, which will allow you to rent the property from the owner. You should be able to get this for very little relative to the size of that land as it currently of no real use to anyone else. You will then get planning permission to use the site for self storage containers (these are shipping containers that you see on the back of trucks everywhere). The reason for this is that they are cheap to buy or rent and when you sell on the site in the future you can sell the containers on very easily. Words of caution: be aware that planning permission only lasts for 5 years currently and so you may need to think about selling or extending the planning on the site for the development within that time frame.
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Secondly make sure there is good demand for storage in the area where you are thinking of using this strategy. If the land is hidden away in some back street, in a residential part of town, you may not be able to get planning permission and there may also not be any demand for storage facilities. This is a typical landbanking PowerPlay. You will babysit the land until the market conditions change allowing you to do what you really want. But you will also earn good profit in the meantime. Let’s see how this plays out:-

Step 1 : How To Source Deal
You can find these sellers by :Look for land with planning permission that has been approved or refused in the last year and see what is happening with those sites. If nothing then it may be worth contacting the owners directly as the market may not suit that particular development right now. Unsold Auction Lots EIG? Commercial Estate Agents Local council websites with planning applications listed

Step 2 : Value The Deal Properly
The value for this deal is based on the cashflow that you can expect. You will need to do competitor research to check what a 20 ft storage container could be rented out for per week. Call all the local storage facilities and check to see what they charge per container etc. There are two ways you make money on this deal :1. The uplift in the price of that land when the market recovers and you can sell it on to a developer 2. The cashflow you make from renting out the containers. Each of these two needs to be valued separately The uplift would be based on the Gross Development Value of the development that can be put on the site. That is the total resale value of all the properties that would be built. For example if there were ten apartments and each could be sold for 100,000 then the GDV would be £1 million. And the land in normal time would be worth about between 30% and 40% of that value i.e. between £300,000 and £400,000. The cashflow should look like this:-

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Rent receivable 50 storage containers @ 200pcm Less Hire of containers Lease of land

£10,000

£10,000

£2000 £650 £2,650 £,7350

(£2,650) £7,350

Gross cash flow Profit per month

There will also be costs involved in insurance and other overhead expenses .

Step 3 : Check Out The Deal Properly
Use the checklist in the “check out the deal section” this is very important in this strategy especially the following sections. 1. Whose name is on title? It is important to make sure you are dealing with the actual owners of the property, and also that you are dealing with all owners. So, for, example if the husband and wife are both on the title deeds then make sure you get them both to sign the heads of terms. 2. Which company has the mortgage? This is important since you should know which mortgage company you are dealing with as you may need to get consent to let from them. 3. What is the amount left on the mortgage? You need to make sure that this amount is less than the price you agree to buy the property from them for. 4. Any early redemption penalties? Check to see if there are any early redemption penalties. You would normally want to run these down before exercising your option. 5. Any arrears on the property? These would need to be taken into consideration as well. 6. Any other secured loans on property? This is very important and is often missed by investors . Any other loans secured against the property would also need to be cleared when you exercise your option so the total for redeeming all loans and mortgages and restrictions would need to be less than the purchase price of the option. 7. Any other restrictions? Check to see if there are any other restrictions on the property. 8. Total amount owing on property less than the purchase price in the option? Make sure that the purchase price in the option is able to pay off all the loans outstanding
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and any restrictions on the property. Otherwise you will not be able to exercise the option since you will not be able to remove all the loans from the title register. 9. Seller not bankrupt? Check that the seller is not bankrupt. This can be done by running a bankruptcy search. Also check that he is not about to be declared bankrupt as this would complicate your option. It is often advisable to get a Debt Management Company that specialises in and understands lease options for example Express Money Solutions to put your client into a debt plan of some sort. 10. Property in flood zone? Make sure that the property is not in a flood zone as otherwise you will find it difficult to get insurance and to get a mortgage if you decide to buy later on. As with any problem there is also an opportunity and it may be possible to get properties on options with the intent of just getting cash flow each month so long as you can get some insurance, even if it is very high or has a very high excess. 11. Use Upmystreet and other property portals to check if property area is ok. Remember property investing is all about location, location, location. This is very important to the long term value of the property, and these property portals allow you to check local information about the area such as the crime rate, unemployment rate and many other factors. 12. Carry out searches We would recommend you always carry out searches on the property, and this is vital if you are either paying a large option fee or carrying out a lot of refurbishment works on the property. 13. Do a background check on property It is worth doing background checks on the property itself. It may be cheap because something has happened at the property, maybe someone was killed in the property or it’s haunted. This may have an adverse affect on the value of the property. 14. Is the property mortgageable? Make sure the property is of traditional construction and therefore mortgageable. Many properties have been built using non-standard construction. Although in the past it would have been possible to obtain mortgages, you would struggle to find a lender for these now. 15. Are there any unsecured loans? Although strictly this is not a problem on the deal, if you do not look at all the finances of your seller, you may find that they become bankrupt and this would have some impact on your option. Many of the PowerPlays here mitigate this but it would be better to get the seller onto a debt plan with a debt management company that fully understands the process of options for example Express Money Solutions.

Step 4: Negotiate The Deal & Get Signed Heads Of Terms
Use the checklist in the Negotiating Section. Special reference is made to the following as they are specific to this strategy.
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Purchase price of property £220,000 SECRET TIP: You could agree the rent to be based on a percentage of what you receive. For instance you will pay 20% of the Gross total rental income. Price Of The Option (Option Fee) £1 Length Of The Option Agreement. Length of The Lease – 5 Years Right To Extend The Option Agreement Another 5 Years Right To Assign The Option Agreement Ensure that you are allowed to assign the lease. Right To Enter The Property Yes Right To Place Restriction On The Property With The Land Registry. Yes

Step 5 How To Find A Customer
Again you are looking for two types of customers the first the developer that you can sell the development onto in a few years time and the other are people who require self storage facilities. Developers To find developers it is easy to get a list of all development companies that work in the area. This information can be obtained from any large local library. You would then write to the developer with a description of your site and an explanation as to why they should buy it . Customers for self storage The following are the kind of people who may want to rent form you ;Market Stall Holders Local Retail Outlets People moving home and needing temporary storage Landlords needing a place to store furniture SECRET TIP: If there is another storage facility nearby, look to see if you can rent a billboard nearby and advertise your storage facility there.
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An Example With The Numbers.
Assumptions Market Value Option Purchase Price Of Property £200,000 £220,000

Price Of Option

£1

Length Of The Option Agreement

5 Years

Right To Extend The Option Agreement

5 Years

Solicitors Fees Lease Payment Sublease Payment Upfront: During:

£1,000 £650 per calendar month £3,250 per calendar month £1 50 Containers @ £100 pcm = £5,000 pcm Less: £650 Lease £2,000 Rent Of Containers £2,350 per calendar month £2,350 per calendar month cashflow

Back End

Planning 20 Houses 20 x £150,000 = £3 Million Land Value = £1 Million Less:

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Cost Of Land = £220,000 = £780,000 Less solicitors Costs, Planning Permission, and other costs Total Profit: £780,000 Back End Plus £2350 x 12 months x 5 years = £141,000 £921,000

This is an excellent cashflow strategy. The added value you give this deal comes from the Change Of Use to house storage containers – an area where there is good demand. This is an excellent PowerPlay for making use of land which you may want to develop later. This is a great landbanking strategy. You profit from the land while you wait for the market to improve. SECRET TIP: There is often a shortage in many cities of specialist storage facilities, for example cold storage facilities. You could look at this as a possibility. SECRET TIP: Many companies require storage facilities in the run up to Christmas since they will often bring loads of products in containers ready for the Christmas sales, so be sure to price these short term rentals higher. Be sure to use the QuickRef to look at how to use this strategy with some of the other PowerPlays. Although the 5 PowerPlays presented here are magic, imagine what you could do with all 51 PowerPlays at your disposal in terms of the deals you could structure! How much cash would they net you? What combinations of PowerPlays could you thread together to become a truly maverick property investor. Imagine how much more successful you’d be when you purchase the full 51 Lease Option PowerPlays – the 500 page 2 Volume Advanced Technical Manual. For the full set of nuances and flavours that you can implement to extract the maximum cash out of your property deals. The 2 –Volume Set is only available on limited release so make sure we have your details here:-

www.LeaseOptionPowerPlays.com.

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The Storage Millionaire

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Strategy 26 The Storage Millionaire HEADS OF TERMS
Grant of an Option to Investor by Owner
Owners Name:

Mr John Smith and Mrs Mary Smith Mr Mark Moneymaker 123 Market Road, Manchester, M1 2AB £220,000.00

Investors Name: Property Address: Purchase Price:

Owners correspondence address if different to the above: N/A Owner to be legally represented:

Y

If yes, provide details of Solicitors acting: TBC Option Period: Estimated Start Date:

60 months in 2 weeks time £1.00 once

Investor to pay Owner any fee to the Seller:

Amount payable to Owner per month: £650.00 Amount payable to Owner Mortgage Lender: N/A Amount payable to Owners Buildings Insurer: Payable to Owners Second Lender: Payable to Mgt Company:

£300.00

N/A

N/A .............
Account No: _____________
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Owners Mortgage Lender Name:
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Address: ___________________________________________________

Owners Second Lender Name: Address:

.............

Account No: _____________

___________________________________________________

Building Insurer Name: _______________________ Policy No:_________________ Address: ___________________________________________________

Mgt Company (if Leasehold): ____________________________________________ Address: ___________________________________________________

Terms of Payment
Any other period payment to be made to Owner £ week/month/year every

Any extra term: right

to extend option for a further 60 months, extension fee =

£1,000.00

_____________________________________ Signed by Owner

_____________________________________ Signed by Investor

Date:_________________

Date:________________

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