Estimated Read Time: 9 minutes
Editor: Shaun Callacher
Purchase Lease Option Case Study
The case study I share with you below is a purchase lease option, to find out what a purchase lease option is and how to find them in your area download my Ebook for FREE: ‘How To Start Your Property Portfolio With No Mortgage & Small Funds: Using Lease’s & Purchase Lease Options’.
This case study is regarding a property with 4 x 1 bedroom flats with a shop below we completed on back in November 2012.
It has an interesting back story to it. It came about through an estate agent. We called the agent on the day the property had been raided by the police, who were looking for a gun (they obviously didn’t find the gun because I have it and use it for my negotiating! ;-) ).
My business partner and I could see the problem was that the landlord and the agent were putting people in under the age of 25 years old who were on housing benefits. Unfortunately, a lot of the people who are in this situation don’t care about who they screw over, just as long as they can have parties every night and feed their drug habits. We realised instantly that the problem could be solved if we only put tenants in who were over 35 and a little more settled down. The plan worked perfectly.
The landlady didn’t live locally and had bought the property a few years prior. After trying to self - manage for a while, raids from the police and phone calls every weekend from the police, she realised it just wasn’t for her. She was so disheartened by the ordeal of her old tenants that she couldn’t even bear coming up to the property to pass on the keys and sign the paper - work. Instead, we agreed to a deal on Skype, signed the contract electronically and asked the local agent to hand us the keys they already had a copy of. This is the great thing about leases and purchase lease options: it is a quick way to come up with a win-win solution for all involved.
See The Numbers Below:
Property Type: 4 x 1 bedroom flats with a shop below
Lease Option Term: 5 years
Funds In: £5000 (to fix the doors and the damaged walls that the police raided! We raised this amount with an investor)
Monthly Rental Income: £2035 per calendar month
Monthly Lease Fee: £900 per calendar month
Voids/Maintenance/Insurance: £150 per calendar month (The flats are very rarely empty and we have had 80% of the same tenants for 3 years!).
Total Cash Flow: £985 per calendar month
Agreed Purchase Price: £85k
As you can see from the numbers above we make a total net profit of £985 every single month from a property we gained control of in a matter of days! We also have the option to purchase the whole block for £85k. Each unit individually is approximately worth £25k+
So when we do decide to purchase the property in our own names we will create instant equity growth.
How many of these deal do you need to change your life?
To learn how to invest using property leases & purchase lease options download my Ebook here: 'How To Start Your Property Portfolio With No Mortgage & Small Funds'
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