Structuring Deals Pt2

Continuing on from the example i started yesterday:

To refresh we have used an option to buy a property worth £100K for £85K, we say that the rental was 700 per month.

Now, less drill down further and make this a bit more like the vendors we all see. Lets say the vendor also had a small second charge of 5K of which the monthly charge is 180 per month.

Working on the basis that the mortgage on the 85K is £600, there is now a monthly charge of £780, leaving you 80 in the red.

So not looking too good anymore is it?

Well here’s where we can use another option to sell this property.

Now for those of you that are not use to options i am gonna keep this silly simple.

We are going to offer this property at £100k on an extended purchase, where the buyer can buy the property off you over a set period of time.

Now to help you get this concept let me ask you what do you do when you go to buy a property normally through the banks.

Well you have a deposit
Take on the balance over time
You have to pay Interest and Captial

Well this is very similar but i’m the bank! and my tenant/buyer pays rent and captial.

So here’s a simple deal i could do with a tenant/buyer, with terms over 3 years.

Deposit 3% of purchase price – 3000
Monthly Rent – 700
Purchase instalments that go towards the deposit – 175

Back so now i can make profit in at the start £3000, in the middle £95 per month (£3420) and the end profit of £15000

So there you have it an overview how you could structure a deal using options, as i said before options is a very fluid instrument and some one like Paul can advise on general pratices.

If you would like to get up and running with options, use the following link to learn a complete tried and tested system here in the UK

http://tinyurl.com/propertyoptions1

Also feel free to leave a comment and i’ll get back to you

Ainslee Connage



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