Structuring Options Deals pt1

Unlike some other property investment strategies that require hard and fast rules to ensure the investor has a profitable deal, options can be a much more fluid system when it comes to terms and how profits are made.

Lets take an example (the figures here a simple for the purpose of demostration).

Property 1.

Property MV (Market Value) 100K
Vendor Mort 85K
Rental  700

Vendor selling due to purchase of new house, i.e paying two mortgages.

Now based on the figures above, most would pass on this deal. Currently due to market conditions they would not be able to do the deal with no money down (NMD) Something investors have become quite fond of, as the discount they may be able to negoitate is resticted to the level required by the mortgage.(15%)

For the example the vendor is willing to sell the property for what they own on it 85K, we could then take out an option to purchase at the price and remarket the property at the market price 100K, hence seeing a back end profit of 15K.

Notice i said back end profit as there are two places you can take profits using options… At the start and in the middle

I’ll go into these tomorrow, until then…

Ainslee Connage



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