Thanks to the use of Purchase Lease Options, we can now gain significant cash flow from a property that we do not own or even have a mortgage on. The very best type of property to acquire on a Purchase Lease Option is a property suitable for multi let which the current owner is trying to rent out (usually unsuccessfully) as a single let property.

This is a very profitable strategy that I normally only share with delegates on my 12 month Property Mastermind Programme however I have decided you give you an outline of how you can make this strategy work for you >>

A mulit let property is one where instead of renting out the entire property to one person or family on a single AST (Assured Short hold Tenancy) you rent out individual rooms to people such as students or young professionals. They each have their own bedroom and then share cooking facilities, living room and bathrooms (although some rooms may have en suite private facilities).

Usually the landlord pays for all of the utility bills so that each month the tenant only has to think about paying one bill rather than worrying about their share of the utilities which can be a real hassle in a shared house. The idea is to make it really easy and convenient for the tenant such that they want to stay in the property. Also it should be cheaper for tenant than it is to live in a shared house than it would be for them to live on their own in a studio flat.

I have a number of these Multi let properties in Birmingham. They are large Victorian houses that would probably only rent for £750 per month as a single let. This is not really enough to cover the mortgage and insurance and so you would not buy this as a typical buy to let property, however as a multi let it is a very different matter.

The rent you can achieve on a multi let room depends on the size of room, facilities in the property and of course the direct competition in the area. The average rent I achieve is now about £350 per month, per room. So for a house of five people, the gross rent is £1750 per month that is £1000 more than a single let property.

I don’t quite understand why some investors don’t do multi lets given this great cash flow. I think the main reason is that they think it will be lots of extra work. Whilst I agree that it may be more work than a single AST you get paid very well for it and beside you can get an agent to do the work for you. Most letting agents are not prepared to look after multi lets but there are some that do, you just need to know how to find them.

Remember you don’t get all of that extra rent. You do need to pay the bills which usually cost me about £350 per month. After paying the bills, mortgage interest and insurance I usually make about £600 per month profit when the property is full.

At this amount of profit per property how many would you need to replace your current income? Most people would only need between 3 and 8 of these kind of properties to be financially free! With the correct knowledge and application of that knowledge you could get one of these each month. How would you feel if six months from now you are financially free?

With the current low interest rates each of these houses is making me more than £1000 profit per month! I don’t expect this to last, as interest rates are bound to go up in the next two years but it is great cash flow right now. As a word of caution I suggest you don’t spend all of the cash. Put some of it aside for a rainy day.

Occasionally you will get an empty room due to the transient nature of your tenants but you need to stay on top of any voids to make sure you fill them quickly. All the time one of your rooms is empty you are throwing away some of your profit. You should never really have more than two rooms empty at any one time as long as you have purchased in the right area and stay on top of your advertising for new tenants.

I still think this is less risk than a property you rent out as a single AST for which you have to cover the mortgage payments etc when you have a void period.

Another factor which puts landlords off multi letting a property is the introduction of Mandatory Licensing of House in Multiple Occupation (HMOs) a few years ago by the Government for multi lets with more than 5 tenants on 3 or more floors. The legislation has been interpreted in different ways by different local councils so you need to check with them to make sure you meet all requirements. Don’t let this put you off as it is just paperwork really.

Anyway back to the strategy and how you can make some great cash flow within the next four weeks.

Here is an outline of the steps you need to take:
1. Speak to the Housing Department of your local council to understand the requirements for HMO Licensing
2. Look on rental websites to find out what an average room would achieve in a multi let in your area, and maybe place some dummy advert to test the demand.
3. Look for suitable larger properties in your area which are up for rent (and or sale) that are currently empty.
4. Approach the owners to see if they are interested in a long term let (5 years) or even better a 3 to 5 year Purchase Leas Option
5. If the owner is interested then double check the figures, make sure the property is in the correct area and start to advertise for potential tenants.
6. Whilst you finalise the deal with the landlord get permission to show potential tenants around such that you have some tenants ready to move in as soon as you have to start paying the owner the monthly rent.
7. Once your first property is set up like this repeat steps 3 to 6 to get the next one.

The best time to do this strategy is over the next six weeks. If a landlord has a property that has been empty for a few months then it is unlikely that they will fill it before Christmas, so a great time to stick a deal with them. This means you can get the property ready for the start of January which is historically a great time to find tenants as many people start new jobs and move around then.

This is of course just a brief outline of the strategy which I explain in depth on my Property Mastermind Programme. However I will also be explaining all the detail behind the strategy at a special one day options event I am hosting with Mark Jackson on Sunday 8th November in London. Mark is the most experienced investor in Purchase Lease Options in the UK. For more details about this special event just click here:

I hope has been useful for you.

Kind regards

Simon Zutshi
Founder, property investors network

If you are an experienced investor with a large portfolio, rather ironically you have less chance of being able to get a mortgage at the moment than someone who is a novice investor purchasing their first investment property (which probably means they also have very little experience) as they are of course less of a risk or so the lenders believe!

So it is really important you do all you can to make sure your credit score stays as high as possible. There are three main credit agencies: Equifax, Experian and Callcredit. You need to check your rating with all of them as they may hold slightly different information. You need to check that the information they hold is correct.

It never ceases to amaze me how many investors I meet who say they were turned down for a mortgage, despite having a good credit score, or so they thought until they actually checked and found out there was something there they did not know about on their credit file. If the information is wrong you can apply to get it changed. This can take some time so well worth doing it now instead of waiting until you are in a rush to buy a great deal.

To keep an eye on my credit score (which is completely shot at the moment because I have too many properties) I use Check my file which is a convenient way to check all three main agencies at the same time for a small monthly fee.

One very important factor that causes problems for many people trying to buy a property is that you MUST be registered on the Electoral Roll somewhere, preferable the place that you call your home address. This is very easy to do, but also very easy not to do and many people just don’t bother in particular if they are moving around a lot. This is a huge mistake. If your records do not match up, if they can not find where you have been or are living it is very unlikely that you will get a mortgage at the moment.

It is the time of year when the Electoral Roll forms that are starting to drop through your letterbox – filling them out and returning them is vital to your credit standing. It’s essential (and is also required by law) that you register on the electoral roll each year – even if you haven’t moved house. When you complete the forms, we strongly recommend that you make sure that you tick the ‘opt out’ section to make sure your details remain private and can’t be used for marketing purposes – as 43% of the population has already done.

Local councils will be collecting data between now and November, in preparation for publishing the 2010 Register of Electors. This information is then sold on to the UK’s three credit reference agencies, which in turn overlay the information onto consumer credit reports.

Because credit reference agencies use the Register of Electors as the index for storing all credit report data, it’s more important than many think to make sure the form is completed accurately and promptly. If lenders can’t see that you are currently registered on the electoral roll at your named address, they may assume either that they haven’t found your full report, or, worse still, in these times of identity fraud, think that your application is fraudulent.

If you find that your credit score is not as good as it should be and so you are not able to get mortgages there are still many ways you can make the most of the fantastic buying opportunity we have now. First of all it may be possible to do a joint venture (JV) with someone who does not have any mortgages (other than their own residence), a good credit score and would love to invest in property but just does not know what to do. Using your knowledge and skill you may be able to find some great deals, put them in your JV partners name and have a deed of trust to recognise you interest in the property.

Alternatively you may chose to use Purchase options to control property without the need for finance at all. Purchase options are the new buzz words amongst property investors and I am sure will become increasingly popular over the next few years.

Kind regards,

Simon Zutshi
Founder, property investors network

I was surprised to see such a big cut in the base rate of 1.5% in one month. I thought the cuts would be steady, but I guess this may be due to pressure from the Government put on the, totally independent, Bank of England. Many people are predicting further interest rate cuts in December but I would not be surprised if the Bank of England wait until the new year, to fully asses the impact of the November rate reduction. Then again, nothing would surprise me now.

A few other considerations for investors are as follows:

With the improved cash flow for many home owners I think we will see a reduction in the number of motivated sellers who need to sell their homes quickly. With lower monthly interest payments, sellers with a property on the market may be prepared to hang on longer to see if they can get a better price. Having said this, there will always be motivated sellers who need to sell quickly.

The point where the market bottoms out and starts to go up again may be sooner now that interest rates are lower. It will become even more affordable for first time buyers to get on the property ladder and once they do, prices will start to recover and the amateur investors will also jump back into the market keen to take advantage of the much lower purchase prices. The availability of mortgages is still an issue and we need the LIBOR rate to drop, to see the effect on new mortgages being offered. This has started to happen as we have seen a number of lenders come out with good low mortgage rates last week. The best Buy to Let mortgage that I saw was a 4.69% fixed rate with a rent multiplier of 125%. If you can’t make you deal stack up on those figures, guest what…it is not a very good deal!

There are currently 95% Loan to Value (LTV) residential mortgages available although I doubt many first time buyers know that due to the doom and gloom image presented by the media. The maximum LTV for most Buy to let mortgages is still generally 75% and will probably be so while prices are still failing, but I imagine will return to 85% when the market starts to go up.

Will the house prices go up again? Yes of course they will. It is a simple matter of supply and demand. At the moment we have a short term over supply as there are not enough buyers in the market but this will change. We live on an island, a very popular island, with an increasing population and changing social demographic trends which means that we will not have enough accommodation for everyone. Long term demand will outstrip supply and prices will have to go up.

My guess (and that is all it is) is that it may take 2 to 3 years form prices to bottom out and come back to what they were, and then another 7 to 9 years beyond that for prices to double again. By the way, if you don’t think prices will go up again you should not be buying property as it is the long term capital growth that really makes you rich, although you should only be buying property now that makes a cash flow now.

Kind regards

Simon Zutshi

The basic principle is that Donald Trump buys low and sells high. No surprise there, but how does he actually do it? You may wonder why he sells property rather than holding onto it. Well he does both. Donald Trump is a property investor (buy and hold) and also a property developer (whereby he makes money by purchasing, refurbish and then selling property).
None of this should be new to you. Interesting how some of the most successful people just keep it simple and take action!

1) BUY BMV: You need to buy property well below market value so that you make a profit the day you buy. Due to the falling property prices in the UK and the US, it is a buyer’s market now and so a great time to be able to buy property well below the market price. One of the key to this is understanding the true market value.
2) KNOW YOUR AREA: One you have picked the area in which you want to invest, you need to do your research and get to understand the market value and rentals in the area. The best way to do this is to use the internet and work with local knowledgeable experts such as letting agents and Estate agents who will be able to provide actual rental and sales figures.
3) FIND MOTIVATED SELLERS: Estate agents will be able to help you find some motivated sellers but you also need to attract sellers to you through your own marketing efforts using methods such as postcards and leaflets distributed in areas in which you want to buy.
4) ADD VALUE: Donald Trump is great at seeing the hidden value in an asset. He likes to buy run down property and “Trump it up”, whereby he spends money to make it look fantastic. The cost of renovation is always a lot less that the value that is added. Donald Trump maximises the use of local and government grants and subsidies to pay for renovation work whenever possible.
5) KNOW THE OUTCOME: Having done your homework before you buy the property you will know exactly what you are going to do with it. Either refinance and hold onto it if the rental stacks up, or sell it. To sell the property quickly in the current market, one would need to sell the property at a discounted price.
6) REFINANCE: Having added value to the property as long as the rent is sufficient you can refinance it to get your initial cash out of the property and to even get some extra tax free cash out of the deal if you purchased at a big enough discount.
7) USE OPTIONS: To minimise the risk Donald trump will secure a property on an option and then find a buyer or tenant before he actually purchases it

There is no doubt that Donald Trump is really smart and an excellent business man. We should remember that he started his Billion Dollar property empire by using these simple strategies on single houses. Everyone has to start somewhere and there is NO reason why you cannot be as successful as Donald Trump if you decide to be and take action to achieve you goals.
I find this reassuring that what I am teaching investors from my own experience is very similar to what Donald Trump has done and continues to do right now in what is the biggest buying opportunity in the last 20 years.
Kind regards

Simon Zutshi

Before this No Money Down Investing became so popular most investors would expect to have to put some money into their investment properties. Typically a property investor would need to put in a 15% deposit and would obtain an 85% Buy to let mortgage. The basic concept being that the property would be rented out to tenants who pay rent which should cover all the costs of holding the property and maybe even make a positive cash flow each month. The investor then benefits from the long term growth of the property value, receiving a fantastic return on their investment due to the gearing of the investment.

The problem with this of course is that at some point most property investors run out of funds that they can use as a deposit and so they can not buy any more investment properties. This is why no money down investing is so attractive as it means potentially you could buy and unlimited number of investment properties.

With this in mind it is important to remember why someone would even consider putting money into a property. Well simply it is because of the fantastic return on your investment. Let’s consider an example to illustrate this.

Let’s say you buy an investment property for £200k (which is currently the average price of a house in the UK). To buy this investment property you would put in a deposit of £30k (15%) and obtain a buy to let mortgage of £170k (85%). Historically property prices double ever 7 to 9 years. Now personally I don’t think we will see much growth for the next 2 to 3 year but by 7 years after that I think prices will have doubled again. So let’s say it takes 10 years from now from prices to double again. No one can say exactly when it will happen but 10 years is probable a fairly safe bet. So the value of your investment property will have increased from £200k to £400k. That is an increase of 100% with just a 15% investment from you which equates to a 766% Return on your investment. That is why we invest in property.

As we now have a buyers market you should be buying property at 20% to 30% below market value. If the property is worth £200k now you should be only dealing with motivated sellers who will be happy to sell it to you for somewhere between £140k and £160k.

Buying at this low price has three main benefits. First of all you will make a profit on the day you buy the property rather than having to wait for the property to increase in value over time. Secondly if the property market does drop in value the very fact that you have purchased well below market value will give you a natural buffer to protect you against a downturn in the market. Finally you will have a lower mortgage and so the investment will stack up better than if you were buying at full price.

So why aren’t more investors rushing out to buy property when it is all on sale? Well it is because smart investors have become used to not having to put any money into their purchases. We have become spoilt and many investors have forgotten the fundamentals of why we invest. Yes you may have to put money in now, but if you get a big enough discount on the purchase price potentially you could re-mortgage in 6 months to get most or all of your money out.

There are a number of creative scheme available right now where you can buy property with no money down but I feel that many of them will be shut down soon as they rather close to mortgage fraud. That’s my view but we will have to see what happens. However if you accept that you are going to have to put some money in, at least for the short term, it means that you will be able to buy some really good investments in the market right now. If you don’t have your own equity that you can use you need to find your funds elsewhere. Perhaps you should consider doing some joint ventures.

If you would like to find out how you go about finding these motivated sellers and how to deal with them then you need to come on my “BMV Quick Start” seminar. The next one is on Sunday 15th June in Birmingham. Full details here. http://www.bmvquickstart.com
Kind regards

Simon Zutshi

The programme featured several people who’s finances have been damaged by poor investment decisions. But the presenter was deliberately pushing these poor people on how bad they now felt and how this was going to ruin their lives. Talk about car crash TV!

When writing a review it is always important to balance the good with the bad but frankly I ma struggling to find any good points. I suppose the only benefit for us is that the amateur investor who does not know what they are doing will be put off investing now which means there are many more opportunities for those of us who know what we are doing.

A typical example of the doom and gloom was a lady who had a property that she had purchased unseen and surprise surprise, it turned out to be a poor investment. I think the property was supposed to be worth over £100k but the programme showed that it did not sell at auction for even £70k, suggesting that it was not worth that in the current market conditions. Now there are two interesting points here:
1) When the camera panned around to look at the people in the crowd at the auction there were only a hand full of people there so hardly a fair sample of the investors in the UK.
2) Secondly at £70k purchase price with a tenant in place paying £495 per month I would have purchased that property all day long. Even my wife who was watching TV with me and who really is not into property said she thought that looked like a great deal.

I do feel for the people who have been duped by Inside Track. Whilst I am sure that Inside Track has many satisfied customers there is an increasing tide of customers who are not happy, such that Inside Track are no longer running public seminars (until further notice) due to the lack of demand. That’s funny, because we have been even busier than ever with people who want to lean about successful investing from me.

The problem with inside track is that the only really have one strategy which is Off Plan. That was great 4 , 3 or even 2 years ago when the market was going up , but not now as the market has slowed and is now declining. Although I think that for their £6000 one off membership fee, £120 monthly cost, and 3% finders fee Inside Track should have provided a certain level of service to their clients, you can not get away from the fact that the individual investors should always carry out their own due diligence. It annoys me when people abdicate all responsibility for their investments and them blame other when thinks go wrong.

The point is that investing in property can be risky. There are problems. But as long as you are in it for the long term the benefits far outweigh the short term hassle . This is as long as you treat it as long term. Too many people see property as a get rich quick scheme which it is not.
I have said in several previous posts it does not matter if short term prices comes down as long as you can afford the holding costs. It can be disastrous to try and sell property now so don’t sell, hold onto it. If you can not rent it out, drop the rent until you get at least something coming in and always have a safety buffer of cash to make sure you can cover void periods and potential rent increases.

For those prepared investors this will be a fantastic time to buy property.

Regards,

Simon Zutshi

Amateur investors would say that it is now very difficult to get mortgages to stack up….. which is certainly true. However, the professional investors see the tremendous opportunity in the market right now. The fact is that due to financing issues there will be an increasing number of motivated sellers who have to sell their properties, but probably less investors to help them out as all the amateurs will be sitting on the sideline not knowing what to do. For those investors who are ready to move quickly there are some great deals out there.

The question is are you ready to make the most of the current market conditions? If I was to offer you a 25% BMV deal which would cash out to the tune of £10k and give you a £200 per month positive cash flow, I am sure you would want the deal, but would you know exactly what to do with it?

If you want to learn about how to buy BMV with none of your own money, or even if you know what to do but are not taking action then you need to quire the necessary skills, strategies, and contacts as soon as possible to make sure you don’t miss out on the biggest property rush in this decade.
You may want to check out my one day BMV quick start seminar. There is one in central London at the end of April and one in Birmingham in Mid June. Details here: www.bmvquickstart.com

Kind regards,

Simon

1) It is coming towards the year end for many national builders who need to hit their targets for the city reports to their shareholders.
2) Sales have been very poor for many builders in the last few months
3) There are site all over the UK with standing stock (cost and profit tied up for the builder)
4) Developers are motivated sellers who will give you good discounts as long as you can move quickly.

So here is my strategy

I am interested in buying houses, as I think at the moment you get much better value for money than flats. I am looking for developments with standing stock so that I can negotiate 15% or more discount. It is important to make sure the % discount that you are being offered is genuine so I check that the developer can prove that similar properties on the site have been sold for the full list price (before the discount). It is worth bearing in mind that most new build do not have carpets, lightfittings, windowblinds etc so this is either something you have to put in or may be able to get included as part of the deal. This is often worth a few %.

It is sometimes difficult to get the rent to stack up, so I am looking for houses where I could get the valuation based on a multilet. This means that the house layout has to be correct and the location need to be right to justify to the surveyor that a multilet is possible. As long as we can satisfy these conditions it is possable to buy with no deposit as follows:

1) Find the property and negotiate a discount of 15% or more
2) Arrnage a Re-mortgage with Mortgage Express based on a multilet
3) Buy with bridging and same day re-mortgage. (using our power team)
4) All you pay is the purchase costs of survey, legals, bridging and finders fee (If you did not find it yourself) plus remember you may need to pay for carpets, furniture etc.

You may think that you do not want to have to manage a multilet and remember that most letting agents will not do them. However, just because you had it valued as a multilet to make the mortgage figures work it does not mean that you need to rent it out as a multilet. It may just wash it’s face on a single AST contract.

Why not see if there are any developemnts near where you live where this strategy could be applied.

If you are using a buy–renovate-sell strategy, there are not
surprisingly three factors which can influence your success or
otherwise of your strategy. These are:

1) The price you purchase at
2) The cost of the renovation
3) The selling price.

Now whilst I strongly maintain that now is a great time to buy,
as there are so many motivated sellers out there, now is NOT
the time to be selling and with prices set to come down even
further there is a big risk if you are trying to sell property that
you will have to reduce your selling price so much potentially
wipe out most of your profit.

I have never quite understood people who buy-renovate-sell.
Yes you can make good money from a deal, but once you sell
the property that is it. You have crystallised your profit.

To make more income you need to go and find another property
and do it all over again. You are in fact still trading your time
for money.

Don’t get me wrong , buying a property and adding value through
renovation is still a good strategy but why sell? Would it not be
better o re-mortgage the property to recover your deposit and
refurb costs then rent out to hold for the long term growth. This
way you get paid forever. All of the statistics and trends support
the fact that property prices will continue to rise over the long
term. The important thing is to make sure you can afford short
term holding costs, and always keep a cash reserve in a high
interest instant access bank account to ensure that you can
cover any void periods or interest rate rises.

Speak to you soon,

Simon Zutshi