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Purchase Lease Options Made Simple · The Property Unleashed Podcast

• 0:00
  SPEAKER_00: Use this property investing tool right here, right now, to maximize your property investing profits.
• 0:17
  SPEAKER_00: Hello and welcome to the Property Unleashed podcast with me, your host, Mark Fitzgerald.
• 0:23
  SPEAKER_00: So in today's session, I am going to outline how you should be utilizing purchase lease options in the marketplace right now.
• 0:34
  SPEAKER_00: If you're not, you're missing a trick.
• 0:36
  SPEAKER_00: So stay tuned, even if you think you know all about purchase lease options on this, because I'm going to share some case studies and I'm going to go through exactly how I'm using this tool to maximize my profits.
• 0:48
  SPEAKER_01: So this can be called quite a few different things.
• 0:51
  SPEAKER_01: So you can be a purchase lease option, which is fundamentally where you agree a purchase price of the property.
• 0:57
  SPEAKER_01: You then agree a lease length of time.
• 1:00
  SPEAKER_01: So how long will that be?
• 1:01
  SPEAKER_01: Now that lease fee could be three months, six months, twelve months, five years, seven years, ten years.
• 1:06
  SPEAKER_01: I wouldn't do it over seven years if you can, because then you have to start actually uh letting land registration and everything know.
• 1:14
  SPEAKER_01: But the most I've ever done actually is a six-year purchase lease option, but I have the option to buy it after year three.
• 1:22
  SPEAKER_01: Then, as it says with there, the option part is the option at the end to buy it.
• 1:27
  SPEAKER_01: So you don't necessarily have to buy the property at the end of it.
• 1:31
  SPEAKER_01: You could, in theory, hand the property back.
• 1:33
  SPEAKER_01: Now, please don't ever do a deal like this and expect to be handing the property back and never buying it.
• 1:39
  SPEAKER_01: What I look to do is make all of my options assignable at the end of the term so that if I don't buy it, I can assign the deal to somebody else.
• 1:49
  SPEAKER_01: So that is a great way for me then to be able to say, well, I've got this property, I've made this money over this time.
• 1:54
  SPEAKER_01: I'm not actually going to buy this myself now.
• 1:56
  SPEAKER_01: I've chosen not to buy it, or maybe I'm not in a position to buy it, but I can assign it to another investor and they can buy it on my behalf.
• 2:04
  SPEAKER_01: And that's not a problem.
• 2:05
  SPEAKER_01: That price is still locked in.
• 2:07
  SPEAKER_01: It can also be called a purchase option.
• 2:10
  SPEAKER_01: Now, as deal sources going forward, a lot of the time a purchase option will be the fact that if you're looking at locking a deal in, locking an agreement in with a landlord to sell their property for them.
• 2:22
  SPEAKER_01: So if you are doing deal sourcing or something, you could look to do a purchase option, which is you've agreed the purchase price, and then you've got the option, and of course, that's assignable to sell it at a set amount of time.
• 2:34
  SPEAKER_01: So you might agree with the owner of a property to sell their property or help them sell it as a deal sourcer or somebody like that, or property trader, as I like to call it, over three-month period.
• 2:44
  SPEAKER_01: So you might have a purchase option in place for three months that it's a lockout agreement.
• 2:48
  SPEAKER_01: You can obviously use a lockout agreement as well.
• 2:51
  SPEAKER_01: The other thing is you could use a purchase option if you had a bit of land or something like that and you wanted to get planning permission or get some planning on that bit of land or that property beforehand, you would lock in that price and have the option to either buy it or hand it back if you didn't get that planning.
• 3:06
  SPEAKER_01: And you have a lease option as well.
• 3:08
  SPEAKER_01: Now, a lease option is open-ended so that you haven't actually locked in the price to buy the property.
• 3:15
  SPEAKER_01: What you've done is you've taken a lease very much like a rent-to-rent, where you rent the property, you take it on as if it's your own, you pay utilities bills, but you use the property to either HMOs or serviced accommodation, and you pay that lease fee.
• 3:28
  SPEAKER_01: But you haven't locked in the price.
• 3:29
  SPEAKER_01: Now you can have a lease option, which is where you lease the property, you pay a set fee every month, and then at the end of it, you have the option to buy it.
• 3:37
  SPEAKER_01: So you have first refusal to buy it, but that might be at the market price at that time.
• 3:44
  SPEAKER_01: Now, sometimes you could do a lease option in case you actually lease the property off of somebody with the option to buy it, and you actually agree with them that you are going to buy it for the market price.
• 3:56
  SPEAKER_01: So maybe it maybe the property is worth$300,000.
• 3:59
  SPEAKER_01: That's what it's worth at the moment.
• 4:01
  SPEAKER_01: They're happy to have that market value, but you've seen where you could add an extension, an extra room, or something like that.
• 4:06
  SPEAKER_01: You could actually do a lease option with them where you lease the property from them, you do the works, and then you sell it at the end and you split the profits and stuff.
• 4:14
  SPEAKER_01: So these can be all used on residential property.
• 4:18
  SPEAKER_01: It doesn't have to be commercial, but it can be, of course, used on commercial properties as well.
• 4:22
  SPEAKER_01: It can be used on land.
• 4:24
  SPEAKER_01: And of course, most of us by now have probably heard the term buy a house for a pound.
• 4:30
  SPEAKER_01: So it's one of those things that when you do a lease option, you will have a lease fee, and that can be anything from a pound.
• 4:37
  SPEAKER_01: In years gone by, it could have been a peppercorn, but now we actually have to use sterling.
• 4:42
  SPEAKER_01: So it can be as little as a pound.
• 4:44
  SPEAKER_01: I tend to, when I do a purchase lease option, is my first lease fee, whatever I've agreed to pay them each and every month, is normally the uh sort of the first payment as well.
• 4:55
  SPEAKER_01: So for argument's sake, I've got one where I pay a thousand pounds a month to landlord.
• 4:59
  SPEAKER_01: That first thousand pounds was the lease fee.
• 5:03
  SPEAKER_01: Oh, sorry.
• 5:05
  SPEAKER_01: So as I say, we've got purchase lease options, we've got purchase options as well.
• 5:11
  SPEAKER_01: The difference between these is the lease part of it.
• 5:14
  SPEAKER_01: This gives you the right to buy at a set time.
• 5:17
  SPEAKER_01: And of course, these are great because it means you're not obligated to buy at that time as well.
• 5:22
  SPEAKER_01: Equally to that, you can make these assignable to any other investors.
• 5:26
  SPEAKER_01: I'll answer any questions at the end of this short presentation.
• 5:30
  SPEAKER_01: And of course, you can give the property back as well if you do not want to buy it.
• 5:35
  SPEAKER_01: You lock in the price now, and this is called the strike price or the option price.
• 5:39
  SPEAKER_01: So when you're looking at the terminology of the deals that you're doing, uh and you need to pay an upfront fee of at least a pound when doing this.
• 5:48
  SPEAKER_01: Don't think of this as a strategy and think, well, that's it now.
• 5:50
  SPEAKER_01: I'm just going to go out there and do purchase lease options.
• 5:52
  SPEAKER_01: Like a lot of people do.
• 5:54
  SPEAKER_01: This is more of a tool that you can use when the search situation and circumstances are right.
• 6:00
  SPEAKER_01: People think this is a strategy.
• 6:02
  SPEAKER_01: As I've said, it's not, it's actually a tool.
• 6:04
  SPEAKER_01: So when you're going in and you're talking to vendors and things, you can actually then work out whether or not this tool or this situation or scenario would work as a lease option.
• 6:16
  SPEAKER_01: So it's if somebody needs the money right here, right now, and that they're adamant that they want to sell, you will not be able to do this.
• 6:23
  SPEAKER_01: And don't start trying to force this strategy down somebody's neck because you'll end up just looking like a bit of an amateur when it comes to getting out there and property investing.
• 6:32
  SPEAKER_01: Thinking you can use purchase-lease options, purchase options, lease options on every deal is the mistake that I see a lot of people make.
• 6:40
  SPEAKER_01: I used to really look at everything and think, oh, do you know what?
• 6:43
  SPEAKER_01: I'd love to do an option on this.
• 6:45
  SPEAKER_01: And there was just no way it was ever going to happen.
• 6:47
  SPEAKER_01: Basically, it's having a conversation, I say, either with the agents or with the owners to be able to do this.
• 6:53
  SPEAKER_01: Now, these can be very, very tricky and difficult deals to do through agents.
• 6:58
  SPEAKER_01: So you really got to get an agent on board.
• 7:00
  SPEAKER_01: You've got to make sure that the agent understands that even if you do buy this property later on, you will or may potentially be able to get in there and pay them their fee as part of the deal as well, to make sure that they're happy with you.
• 7:13
  SPEAKER_01: And of course, what's not to love?
• 7:15
  SPEAKER_01: If you can get in there with an agent, you can agree a fee to pay them whilst you're doing these opportunities, doing these deals, and they can find you more potential opportunities like this and work with you, then I'd pay for that all day long.
• 7:27
  SPEAKER_01: But as I say, make sure that you're not just trying to look at everything like that.
• 7:31
  SPEAKER_01: If somebody doesn't really need the money right now, is open to making more month-on-month rent, then that can work very, very well for you.
• 7:40
  SPEAKER_01: You need to see it as a tool, you need to see whether that tool fits the situation.
• 7:44
  SPEAKER_01: And of course, not think that the deal will fit the tool.
• 7:48
  SPEAKER_01: Don't use a hammer when you need a screwdriver, is a good way of looking at it.
• 7:52
  SPEAKER_01: So you need to be open to the opportunities.
• 7:54
  SPEAKER_01: And this is where I always say that, you know, in 2026, you need to have a full toolkit of skills when it comes to your property investing.
• 8:02
  SPEAKER_01: And this is something that I work very, very hard with people in my own community of ETA, where we have all of the different strategies that you can go through and learn to be able to have that full toolkit.
• 8:12
  SPEAKER_01: Because you might walk into a property looking at it, somebody might be struggling to sell it.
• 8:17
  SPEAKER_01: It might be a rundown property, but hey, they need the money.
• 8:20
  SPEAKER_01: So a purchase lease option wouldn't work right here, right now, because you know, within the next six months, seven months, they want to have sold the property and they want the money out of it.
• 8:29
  SPEAKER_01: But you might see, because you're a property investor, how you can add value.
• 8:34
  SPEAKER_01: Well, I have students now that are going out there and they're doing what we call assisted sales, which is where they lock in the price now, and you can use a lease option to do these as well.
• 8:45
  SPEAKER_01: They lock in the price now for the property.
• 8:47
  SPEAKER_01: So the property is at a set price, but then they're gonna put some money into the property and do it up to bring it up to a higher spec and then sell it at a higher price, in which case, then the seller gets a sale because the property's had the uplift, and of course, it looks better, so it's it's gonna get more demand.
• 9:04
  SPEAKER_01: There's gonna be more opportunities to potentially sell it to the residential market as well.
• 9:08
  SPEAKER_01: You've put in whatever, you know, maybe 20, 30k, 40k to do the refurb, and then you sell it at a new price.
• 9:15
  SPEAKER_01: Then once it's sold, they get their money, you get your money back from the works that you've done, and of course, all of that profit then is yours as well.
• 9:23
  SPEAKER_01: It can be a win-win for all parties on that front, but you need to make sure that you set those up and you need to also know your market area as well.
• 9:30
  SPEAKER_01: At the moment, right here, right now, and this is one thing I will be honest with you assisted sales can be a little bit risky in the current climate because there's a lot of properties that are a bit sticky out there at the moment.
• 9:42
  SPEAKER_01: They're just not selling in a timely fashion.
• 9:45
  SPEAKER_01: But if you've got a really good area of residential properties where they're shifting pretty well and the market's not really stagnant, or it's a gold mine opportunity in area, that can work really, really well.
• 9:57
  SPEAKER_01: But like I say, it's about having that toolkit to be able to use.
• 9:59
  SPEAKER_01: So it's not just I've learned one strategy, it's lease options, or I've learned one strategy and it's rent-to-rent or it's deal sourcing.
• 10:08
  SPEAKER_01: As I say, go out there and get the full toolkit.
• 10:11
  SPEAKER_01: And that's something that I love to help people do as well.
• 10:13
  SPEAKER_01: So that's why when I come to these sessions, I love to talk about different strategies and help everybody here to really open their minds up to them all.
• 10:21
  SPEAKER_01: So a purchase lease option can give you a lot more flexibility when it comes to doing your deals.
• 10:27
  SPEAKER_01: You don't always need to think below market value with a deal because sometimes if you can lock the purchase price in now and give them what they want, which let's say it's 300,000 pounds they want for their house, you think it's probably only worth about 250.
• 10:40
  SPEAKER_01: You could say to them, Well, listen, I can make you a cheeky offer of 225 for the property because it needs X amount of work doing on it, or I could give you the 300,000, but you just have to wait for a bit of a bit a bit longer to be able to get that money.
• 10:54
  SPEAKER_01: Would that be something you're interested in?
• 10:56
  SPEAKER_01: Because in that time, I'll also give you a monthly rental lease fee.
• 11:01
  SPEAKER_01: So you're gonna actually end up making more money over the amount of time that we do this deal than if you were to sell it now below market value.
• 11:08
  SPEAKER_01: Sometimes you can offer more for the property as well, so don't get too caught up.
• 11:12
  SPEAKER_01: It's 300,000 pounds.
• 11:13
  SPEAKER_01: This is my example of a property.
• 11:15
  SPEAKER_01: You might say to yourself, well, I'll tell you what, there's a lot that I can do here.
• 11:19
  SPEAKER_01: And so what I might do is offer them a little bit more of an incentive to say, Well, you want 300,000 pounds.
• 11:26
  SPEAKER_01: I don't actually think it's worth that at the moment, but I'll tell you what, I'll pay you 310 or 320 if you can give me a bit of time to do this deal.
• 11:33
  SPEAKER_01: This works really, really well, or even a part of the profit share.
• 11:37
  SPEAKER_01: So if you were to buy in the future, it might be worth more, have a bit of capital growth on there.
• 11:42
  SPEAKER_01: There's so many different ways that you can do these opportunities.
• 11:45
  SPEAKER_01: And of course, you can remove a lot of the competition in the marketplace in your areas by being able and being flexible when doing opportunities in deals like this, but always, always make sure that the deal is ethically right.
• 11:58
  SPEAKER_01: It's a win-win for all parties.
• 12:01
  SPEAKER_01: The last thing you want to do is to get somebody who can actually do a deal, but is a little bit reluctant to do it or is not sure of anything because what they'll do is get buyers' remorse.
• 12:13
  SPEAKER_01: And if you're paying for solicitor fees and things, they might pull out.
• 12:16
  SPEAKER_01: I've had people pull out on me before.
• 12:17
  SPEAKER_01: I've lost thousands of pounds on solicitor fees because of it.
• 12:21
  SPEAKER_01: And the main thing there was because my communication wasn't good enough between myself and the vendor.
• 12:27
  SPEAKER_01: I needed to make sure that I kept talking to the vendor and I kept getting them in place.
• 12:31
  SPEAKER_01: Every purchase lease option deal is different and needs to be treated like that, and it has its own contract drawn up for it.
• 12:38
  SPEAKER_01: But make sure that you've got the broad stroke of agreement laid out before you go to the solicitors, or it can cost you a lot more in solicitor fees from to in and throwing.
• 12:48
  SPEAKER_01: So get what we call a heads of terms, which can just be a blank piece of paper, write heads of terms on it, and then write down what the terms will be.
• 12:55
  SPEAKER_01: How long will the agreement be for?
• 12:57
  SPEAKER_01: What's the lease fee going to be to it?
• 12:59
  SPEAKER_01: What are you allowed to do with the property, or how are you allowed to use the property in the lease agreement time?
• 13:05
  SPEAKER_01: If you're looking at using it as an HMO, maybe it already is, then great.
• 13:08
  SPEAKER_01: If you're looking at doing a service to accommodation and it has a mortgage on it, is it allowed to have service accommodation on there?
• 13:14
  SPEAKER_01: We've got to make sure that we're doing things right.
• 13:16
  SPEAKER_01: So the difference is purchase lease options and purchase options.
• 13:20
  SPEAKER_01: I'm not going to go through all of that again because I've already explained it.
• 13:25
  SPEAKER_01: But the one thing that I would like to say is that you need to make sure that you're taking on the right properties as well.
• 13:32
  SPEAKER_01: Because what you see a lot of people doing is, oh, I can do a lease option, but they don't know what to do with the property.
• 13:38
  SPEAKER_01: Okay, they haven't got a clue at the end of the day.
• 13:41
  SPEAKER_01: They're they're just like, well, I've got this opportunity, I've got this one-bed flat.
• 13:44
  SPEAKER_01: Now, this one-bed flat might be in the middle of a really bad area, but the owner's open to do a little purchase lease options.
• 13:50
  SPEAKER_01: So they're thinking, well, I can monetize this, I can do there's loads of properties out there.
• 13:54
  SPEAKER_01: We're going to come across bad properties, we're going to come across good properties, focus on the good properties.
• 14:00
  SPEAKER_01: Okay.
• 14:00
  SPEAKER_01: Don't just get that old motivated sort of buyer's feeling just because somebody's open to it.
• 14:06
  SPEAKER_01: All right.
• 14:07
  SPEAKER_01: It's very easy to get trapped in that.
• 14:09
  SPEAKER_01: If the owner cannot sell the property or and there's nothing else for them to do, then of course we can help them with this.
• 14:17
  SPEAKER_01: Now, purchase lease option without the lease part is obviously used a bit differently.
• 14:22
  SPEAKER_01: So, what you can do is as I say, is you can do a purchase option where you actually agree that.
• 14:27
  SPEAKER_01: And this is a great one, as I said before, for deal sources.
• 14:30
  SPEAKER_01: They use purchase options to use a lock out agreement to lock that deal in there and then go off there and assign it to an investor.
• 14:39
  SPEAKER_01: And of course, you can also use purchase options if you need a bit of time to get financing lined up, if you're looking for investors to buy deals and things.
• 14:47
  SPEAKER_01: So you can really use these any way you want.
• 14:50
  SPEAKER_01: They've just got to be used in the right situations, the right scenarios, and at the right times.
• 14:55
  SPEAKER_01: And if you do that, then they're great to do it.
• 14:58
  SPEAKER_01: So a lease option on, you know, when it's used properly is to control the property over time.
• 15:03
  SPEAKER_01: You want to get a property that you can cash flow or that you're going to add value to.
• 15:08
  SPEAKER_01: Rent-to-rent deals also work very similarly with these, but you haven't obviously locked those in.
• 15:13
  SPEAKER_01: But you sometimes you want to be looking at the right strategies to use with this.
• 15:17
  SPEAKER_01: Now, that could be you're flipping the property, that could be that you're just going to use it as a buy-to-let.
• 15:21
  SPEAKER_01: I like to use it now for supported living and social housing.
• 15:25
  SPEAKER_01: So one of the things that I do is now I look at the property, and if it's just a vanilla buy-to-let, it might even be just a two-bed terrace property.
• 15:33
  SPEAKER_01: Is there a provider I have in my company in the area that I can put in there?
• 15:37
  SPEAKER_01: If I'm going to do a lease option for three years, I'll try and put a provider in there for three years, maybe even five years, because I will intend to buy it and I will intend to keep that provider in there.
• 15:46
  SPEAKER_01: Now, if I can get a supported living provider in there as well that's paying me market rents or just above on an FRI fully insuring lease over that time, it's a set and forget.
• 15:57
  SPEAKER_01: I just make sure that I'm paying a lease fee that's slightly less than obviously what the provider will pay, and then I can sit back.
• 16:05
  SPEAKER_01: Very much like a back-to-back deal, but I like to try and own the asset at the end of it as well.
• 16:09
  SPEAKER_01: The great thing about doing a lease option with supported living or C2 children's care or anything like that is potentially at the end of the term, if I didn't want to buy it, I might be able to offer it to that charity, to that provider, and they might be interested in buying it themselves.
• 16:25
  SPEAKER_01: Even if I don't want to buy it, it's a very, very attractive opportunity for any investors because it's a turnkey, already got the leases in place opportunity.
• 16:35
  SPEAKER_01: So that is something that can be very, very important and can really help everybody as they're going forward.
• 16:40
  SPEAKER_01: And I'll just leave you now with a case study of one of my opportunities that I have done myself.
• 16:49
  SPEAKER_01: This is done on a six-bed HMO, and this was a rent-to-rent deal, which basically all I did was I just said to the owner, if you're ever thinking of selling, just let me know.
• 16:59
  SPEAKER_01: I might be interested in buying it.
• 17:01
  SPEAKER_01: They were, they got back to me after a couple of weeks and we agreed a purchase price of£220,000.
• 17:08
  SPEAKER_01: The market value is£250 at the current time of me talking to you about this now.
• 17:14
  SPEAKER_01: The upfront option fee was£1,000, and I pay them£1,000 a month as well, lease fee over that time.
• 17:21
  SPEAKER_01: So they're making more money, so they'll actually earn more than their£220,000, but that's what's locked in.
• 17:27
  SPEAKER_01: The legal cost for me with the solicitors and everything was just it was just over£3,000.
• 17:33
  SPEAKER_01: And a cost in total with the option fee is just over£4,000.
• 17:38
  SPEAKER_01: So for£4,000, I'm controlling a property that's making me good money each and every month, and I've locked it in there.
• 17:44
  SPEAKER_01: This is a six-bed HMO.
• 17:46
  SPEAKER_01: The property makes me, well, it makes me a little bit more than that, actually, since this slide was put out, but we'll say£2,700 because the rents have gone up.
• 17:53
  SPEAKER_01: Needed a bit of decorating, we'll need a new kitchen.
• 17:56
  SPEAKER_01: We've actually put the new kitchen in there now.
• 17:59
  SPEAKER_01: I pay the owner, as I say,£1,000 the lease fee.
• 18:02
  SPEAKER_01: My costs with the bills, utilities, and everything that I pay for, because this is an HMO, is£700, and my profit is around£1,000.
• 18:10
  SPEAKER_01: Can be a bit more, can be a little bit less, depending on Boyd's, depending on if there's any works that need doing.
• 18:15
  SPEAKER_01: But because this is a purchase lease option, if the boiler goes or there's any major problems, apart from structural, I will sort them out because I treat these opportunities and these deals as if I own them.
• 18:26
  SPEAKER_01: I have a five-year option on this property, and that's going to make 60k in five years.
• 18:31
  SPEAKER_01: So if I take that profit that I'm making each and every month from this deal, and I do, so some of it goes on working capital, some of it just goes back into a pot, and that is building up my deposit to buy this property.
• 18:43
  SPEAKER_01: So in theory, unless something major happens, I should have enough money saved through the actual money I've made from the property to be able to use that as the deposit when I actually buy it.
• 18:55
  SPEAKER_01: So in theory, it's a no money down deal, although there is money that goes down.
• 18:59
  SPEAKER_01: There's always money that goes down, whether it's your money, whether it's saved up money, whatever.
• 19:03
  SPEAKER_01: But I'm recycling the money to actually build the assets up.
• 19:06
  SPEAKER_01: And if I choose not to buy this, then I will be looking at passing that on to an investor as well.
• 19:13
  SPEAKER_01: Why does that keep happening?
• 19:15
  SPEAKER_01: So I'd like to say, I just wanted to show you all and talk you through it.
• 19:19
  SPEAKER_01: As I say, I have to pay for the upkeep on this, but the money I make, I put back into the property.
• 19:24
  SPEAKER_01: And as I say, I will use it as a deposit to buy it.
• 19:27
  SPEAKER_01: So that is a quick snapshot of purchase lease options.
• 19:31
  SPEAKER_01: As I say, it's just one of the many uh trainings and tools and everything that we help the community with and we teach and we make sure that everybody is up to date with as well.
• 19:41
  SPEAKER_00: So if you need any help or support with your property investing, please do visit thepropertyunleash.com or education toaction.com.
• 19:51
  SPEAKER_00: We have free tools and resources there.
• 19:53
  SPEAKER_00: We also have a community of training and support to help you with every step moving forward.
• 20:01
  SPEAKER_00: Most people turn around to me and say they wish they'd seen this a long time ago.
• 20:05
  SPEAKER_00: So if you are interested in this, have a little look for yourself.
• 20:08
  SPEAKER_00: Thank you for joining me today, and I look forward to you joining me in the next episode.