Hi, Samuel Leeds here. I hope you've had a fantastic day. In this video, it's where it
gets very, very exciting. This is the video where I'm going to explain exactly how you
can buy properties without using any of your own money. I'm doing this all the time, and
so many of my students. I do talk about this in my book, "Buy Low, Rent High". Again, if
you haven't read this, I would really recommend it. If you have read it, don't forget please
go to Amazon.com.uk and leave me a lovely review. That will be very, very kind of you
as well.
So far, video one was about what is financial freedom, and getting us in the right mindset
of property investing, also busting the seven myths that society has led us to believe to
be true. Video two was then about, okay, we want to buy properties. We're excited. When's
the best time to buy? What do we buy? What are the gold mind areas? What are the areas
we should stay away from? What's going to happen in the next few years with the property
economy? This video is about how to buy properties with no money.
So, there are effectively four ways that you can make serious money through property, starting
with nothing. Effectively, you can start out with "zero". If you wake on board any of these
four ways, you can go and absolutely smash it. The one way we'll be looking at today
doesn't start with a Z, E or an R, it starts with an O. This is one of my favourite ways
to make money and buy property without having any money to start with. That is options,
namely lease option agreements, lease options. When I started buying property in 2008, 2009,
that kind of time, what you used to be able to do ... everyone at the time was buying
properties below market value and then they were refinancing the properties the same day
and pulling all of their money out. I thought, boom. This sounds great.
Just as I got on board, guess what happened? I'll tell you exactly what happened. This.
The rules changed. Again, remember what I said? The people that make up the rules make
money in property. If the rules change, don't get bummed out. Don't get worried. What happened
was effectively you could no longer buy and refinance the same day. Today you have to
wait six months, which adds a lot of complications. It made my strategy much more difficult. Everyone
would say, "The days of buying with no money are over." However, 2009 I went on a training
programme where they taught you how to buy property with no money using lease option
agreements.
Now, the cool this is this. I'll give you the good news and the bad news. The bad news
is when I went on the training programme, although I had a lot of fun and then jumping
up and down on the tables shouting about, lease option agreements are fantastic, and
all this, I didn't actually learn anything about lease option agreements. I had a really
fun time but I didn't learn anything about lease option agreements. Don't feel too bad
for me though 'cause they had the advanced programme. You've been on these programmes
before, where they up, up, up, up? I was spending a lot of money. At the end of it I did ... lease
agreements, again it was kind of theory. Through trial and error, blood sweat and tears and
making a lot of mistakes along the way, I figured out how to do lease option agreements
and smoothly and effectively buy properties with no money on option agreements.
Not many people are doing this. A lot of investors, they know about this. They're not doing it.
In fact, me and my students are the only people that I've met that are actively doing this.
Other than that, people just know about it and talk about it. I'm going to condense what
I know about lease option agreements into the next sort of 5-10 minutes. You will know
probably more than I did after I got my initial three day course. That's the good news.
Let me give an example. I'll give an example of a lease option agreement I did five years
ago. It's two bedrooms. I'll tell you the story, the background, so you really understand
this. There's a guy called Steve. He buys the house for £95,000. True story, by the
way. This house is in Warsaw Bloxwich. True story. It goes for £95,000. He puts down
a small deposit of about £14,000. His mortgage outstanding is £81,000. That's his mortgage.
This is his purchase price. The mortgage payments are £145/month for the mortgage payments.
That's the setup. Steve buys it but he doesn't live in it. He rents it out to his son. All
is lovely. His son pays him quite a conservative rent of £450/month. He's making a little
bit of profit, but really he bought it with what? His feelings. He bought it for his son,
to do his son a favour. He's making a few hundred pounds of profit, but he wants his
son to one day buy the house off him. He wants it to be his son's. He bought it with his
feelings.
Now what happens at this point is Steve moves away to Darbishire, with his wife, to retire.
They're now off in Darbishire, far away from the house. It's okay because even though they're
very risk adverse people, their sons in the house looking after it. Problem, their son
moves out. Now the house is empty. Their £450 rent becomes nothing. They're paying £145/month,
every single month. The house is empty. They don't want to be landlords. They don't want
to rent out to anybody else. They are thinking, oh my gosh. What do I do? They do they only
thing that they can do. If you can try to remember this because that would be great.
We're going to rub them off now. £81,000 is the mortgage outstanding. That's the important
one to remember.
They think, oh my goodness. What are we going to do? They decide that the only thing they
can do, they live so far away and the house is empty, is sell up, sell the property. They
go to an estate agent and the estate agent says, "I know you bought it for £95,000,
but you know what? The economy and different things, it's not going to be that simple to
get your money back. What we would suggest is that you put it on for £90,000." They
put it on for £90,000. In six weeks they have three viewings. Two of them cancelled
and one of them came and offered £75,000. Not good news. Now, Steve is pulling his hair
out thinking, oh my gosh. This house is on for £90,000. I bought it for £95,000. It's
not selling. It's empty at the moment. There could be squatters that move in and they could
trash the place. Ah. What do I do?
Steve got in touch with me. I'll also tell you about how to find these types of deals
in the next video, okay? Bare that in mind. Steve got in touch with me and he says, "Samuel,
could you please buy the house off me for £90,000? I paid £95 for it, but I'll let
you have it for £90." From my point of view, if I buy it for £90 and rent it out for £450,
it will probably, in fairness, get more than that. I'm not going to get more than £550
rent. If I buy it for £90 and rent it for £550, back to the last video, what to buy,
is that going to be a good investment for me? The answer is, no. My return is probably
going to be maybe around 15%. It's not very good, £90,000 and £550 rent, and that's
max. The returns now great. It's okay, but it's not fantastic. I said, no. I couldn't
do that.
I said to Steve, "I can't buy it for £90, but I could buy it for £80,000." From Steve's
point of view, not only is that considerably less than he paid for it, but he's got a bit
of a problem. The problem is that his mortgage outstanding, if you remember, was £81,000,
which means that Steve is actually ... not only is he going to sell it and lose all his
deposit money, he's going to lose all his deposit, lose all his money, and he's going
to have to pay £1,000 to his mortgage company to make up the difference. That makes sense.
To him, that's not really very feasible. He says, "Look, if you give me £85, that will
cover all my costs and I'll pretty much just break even." I think about it and I'm thinking,
again, £85 and £550, it's okay, but it's not great. I'm a smart investor. I want to
be buying properties that are a really good asset.
We're at a sticky point. Most people would leave the offer on the table, would walk away
and hope that one day Steve comes back to them and says, yes. In the meantime he would
have probably sold it with the estate agent or the deal will fall through. They'll walk
away. However, I didn't walk away. I made Steve a very interesting proposal. That is,
not a lease option agreement. People that would offer a lease option agreement, at this
point, would never get it.
My first offer is £80k. That's my first offer. Steve says, no. What you need to do, at this
point, is you need to begin to exhaust the options. "Okay, Steve, why don't you keep
on with the estate agent. Talk to them about the idea of just keeping it on." If he goes,
"Yeah, okay, I'll do that." Then great, walk away. If he says, "Keep on with the estate
agent? Are you nuts? They're horrible. They're crazy. It's been on forever." He doesn't want
to do that, then you offer him the, not lease option agreement. Then pretend that Steve's
your brother and you're giving your best advice to a best friend. "Steve, this is what you
should do. This is the best thing that you should do. Rent it out. I can connect you
with a local agent in the area. It's a good property. I reckon you'll get £550 for it."
If Steve says, "Yeah, I'll rent it out", then guess what? You've helped him and that's okay.
Again, a big misconception with property investors is that you need to make money by getting
good deals. No, you make money by adding value to people, and by being a problem solver.
It's time to rent it out. At this point Steve was ready. "Look, Samuel. I don't want to
rent out. I already told you. I don't want to be a landlord. One is trashy. One is this."
He's very risk adverse. When you've exhausted all his possible options, he won't sell to
below market value. He doesn't want to keep on with an estate agent. He doesn't want to
rent out and be a landlord himself. Then, you offer him the lease option agreement.
They don't call it a lease option agreement. You effectively just say something like this.
Okay, Steve. You don't want to do these things. I may be able to offer you something like
this. I can give you £95,000, however you wouldn't get paid for another five years.
What? Are you crazy? However, now I would take over your mortgage payments, take over
complete responsibility of the property. It would be effectively like it was mine. You
get to walk away from it. In five years time you will get £95,000. What's he thinking?
He's thinking, I'll get a lot more money down the line. If I sell it today, I won't make
anything. Yeah, that's good. It sounds great. However, every single time he'll always say,
no. There's a few magic words you can say. Now, I'm running out of time right now. I've
only got two minutes left.
There's a few magic words that you can say which will get a yes every single time. Again,
if you come to my property investors crash course, we'll be going through the Z-E-R and
we'll be going through this in a lot more details. If you've not been on the crash course,
I'd really recommend going on. There's a few magic words you can say when he says yes.
He did say yes five years ago. He's really happy. He had the property taken off him straight
away. He didn't have to pay his mortgage company. He didn't have to do anymore viewing. He didn't
have to deal with any tenants. Me, I took over his mortgage, £145 mortgage. Rented
out the same day I got the keys for £550, which means that I'm making a profit of £400,
a gross profit of £400/month. Not bad for no money down whatsoever. In the last five
years, the property has gone up by £45,000. So, I've made £400/month and I've made £45,000
in capital appreciation. I invested nothing because it was all done on a lease option
agreement.
Now, I appreciate that is a short summary version. You know what? This was a deal five
years ago. I did a deal last week just like this, up north. This is a fantastic strategy.
If you want to learn a little bit more about lease option agreements, understand how it
works and the paperwork and different stuff like that, I'd recommend this video right
here. Have a fantastic evening. The next video is going to be on how to find these types
of deals, how to find deals, how to source HMO's, how to source single lets, how to source
options. Watch out for that. It will be coming in your inbox very, very soon. God bless and
hope to see you at the crash course.