LEASE OPTION AGREEMENT UK | USING HMO PROPERTY INVESTMENT | GILLIE BARLOW


– Please put your hands together and help me welcome to
the stage, Gillie Barlow. (audience applause) Gillie, hello. Come in have a seat. – [Gillie] Thanks. – A lot of people really
struggle with this concept. Why on earth would a
landlord give you an option? People really struggle with that and is what I said it before, if you don’t believe that
landlords will do this. Guess what? You’re absolutely right. If you don’t believe that
options are out there, you’re right, you won’t find any options. You can just leave them
for us to do instead. But I don’t want that for you, I want you to get this and build your belief
about what’s possible. So, talk to us about
this particular landlord. How did you find him,
what was the circumstance? Okay, so I found this particular
house through an agent. I love working with agents
and if you can get agents to understand all about options, they are a fantastic way of finding them because if they ring you up and say, “Hi I found you an option.” it’s quite great really. – Kind of works, doesn’t it? – It does work, yeah. It’s absolutely imperative that we obviously speak
to the agents correctly otherwise they’ll just bin your file. But anyways this just– – And most, just to say there, we’re not gonna cover that right now, we’ll talk about it later but most agents don’t get options, they don’t see the benefit because they want to get a
sale right now, don’t they? – Absolutely, they don’t know it. A lot of agents know as much as what’s written on a piece of paper. So, if they’re very very young and they know what’s written on the paper. So, if you start suggesting something that’s outside the box, they’re just freaking
out and they just want to sell the property
and get the commission. So, in this particular instance, it was on with an agent called Chancellors which is the biggest agent
in Oxfordshire, actually. And it’d been on the market for a year. It was a very nice gentleman who wanted to move to Shropshire. He got a house in Farington
that he managed to sell and he got this already HMO property that was rented out to students
that he just couldn’t shift. – Okay, so he was kind of
moving out the area himself. – Yeah, he was. – So, he didn’t wanna be
around to manage it anymore. – No. – On the market, couldn’t sell. So that’s always a good sign by the way. If something can’t sell, that landlord’s obviously got a problem, the estate has got a problem, we can maybe see if we can
solve that problem for them. Okay, so it’s on the market
for 350 and you basically. What did you say to him? – Okay, so I said quite a lot actually. – I can’t believe that at all but um. – (Gillie laughs) No, first of all, I built a rapport up before
I mentioned anything. And once I got to the point
where I could explain options without using that terminology and when I started
speaking to him, I said, “Please understand that by.” First of all I asked as a prequel, so I said, “Would it be okay “if I explained something
a little bit different. “By the way, you will get
your commissions far quicker.” and that made him listen. – That was the estate agent? – The estate agent, yeah. Once I got him to understand that this could be very powerful and it could shift the property
and get him his commissions, I asked if I could have a
meeting with him and the vendor. Because I didn’t want him
explaining options to the vendor and getting it all wrong. – ‘Cause he wouldn’t
do it right, would he? – Probably not. – Probably not, no okay. – He might and what I tend to always do is send an email to the estate agent reiterating everything
that we’ve spoken about. So, he’s got it on an
email in case he decides to speak to the vendor in advance. But, I wanted that meeting
with the vendor and with him so that he saw I wasn’t
going to try and cut him out of the deal but also that I would then be able to speak to the vendor myself without worrying about
it being said wrong. – Great, so you had the
conversation with the owner and obviously he wanted to
sell but it wasn’t selling so this was a kind of a solution and in an option, basically
you’re taking the property on and you’re agreeing to buy
in a certain number of years. Now, you have the right to
buy but not the obligation to which is pretty good. You’re gonna set a price, so
how did you agree the price that you’re gonna buy it for? – Okay, so the way I work with options is I would never personally, this is just me. I would never go in under value. I would never ask less
than the asking price because otherwise I feel like I’m going in like a sort of box standard
investor wanting a discount. But I’m also not going to give it to him for a certain number of years so– – Sound so great, so you’re
not gonna pay me the money and you’re not gonna pay me now, great. Well, you know. – And you don’t want to cheese them off, you want them to go. When I tell you what I said to the vendor, he turned around and said, “Why
would you do that, Gillie?” So, what I offered was 350,000
which was the asking price. I offered it over term of five years and I offered him 1,800 pounds a month. And he just said to me, “Why would you give me that much a month?” and I said, “Because it works for me.” – Now, we should explain this point. That’s how much he was
renting out for wasn’t it? – He was getting that much. That was the profit he was– – Oh sorry that was the
profit he was making. – But I didn’t know that
it was just coincidental. I hadn’t got a clue what
profit he was making ’cause I didn’t know what he
was paying on his mortgage. – So, he could walk away have
none of the hassle but still make the same amount of
money on the property, okay. But you were able to do that because you were able to lift
the rents up, weren’t you? – I was, I changed certain things, I didn’t spend a lot of money but he had it on for quite low rents. It was all a bitt messy really in terms of the way that he was
structuring the rent prices. They all had different
prices in the rooms. I just want to say as well
that one of the reasons I believed he couldn’t sell this property is because it really was
a three bedroom house that had been cut up. I didn’t cut it up. So, it was six tiny bedrooms
and it really wasn’t very nice. It had a one bedroom annex but the annex was
literally a single garage and so the width of it was a divan bed. You couldn’t walk down the side of it. So, he was struggling to sell it. – Let’s look at the the numbers now. So after all the costs
because you were able to increase the rent after paying him, you were still up to a really good profit each month on this property
which is pretty amazing. On a property you don’t
own, have no mortgage on. So that’s a massive, and you got it for. So is it four or five years ’cause what happened to that price– – Okay, so what happened was
I offered 350 over five years and I offered him 1800 pounds a month. He came back and said,
“Five years is too much.” So, I believe in the old
fashioned weighing scales where if they want something changed then you change something
else to suit you. And so when he said, you can
have the option for four years. I said, okay we’ll make
the purchase price 340 and between you and
me, 10 grand in 4 years isn’t going to be much difference when I buy it with a mortgage, is it? – [Simon] But he probably
bought it years ago for a lot less than anyways so
he’s still making good money. And the point is he’s moving away, he doesn’t have the hassle. – [Gillie] Absolutely, no
hassle. He was really struggling. There were students in there
not creating a great atmosphere or indeed keeping the place nice and he just didn’t want the hassle. – [Simon] Now, how long ago was this? – The option was agreed in 2000. It was just as I started
mastermind, so, 2012. – Okay, so your first deal
on Mastermind, wasn’t it? – It was my first deal on
Mastermind, yeah, absolutely. – Yeah, okay, 2012, so
over five years ago. So, obviously now it’s beyond five years. So what happens obviously
at the end of an option, you can either walk away if it hasn’t got the growth you want, you could renegotiate, you could buy it or maybe you could flip
it on someone else. But you decided to buy it, didn’t you? – I decided to buy it. I thought about it because an estate agent had approached me in year
three and said Gillie. In actual fact, the same estate agent. “Gillie, do you want to sell
your property on Greys Road?” and I said, “Why would I want “to sell my property on Greys Road? “It’s creating a 1700
pound cash flow for me.” And he said, “We think you will “when we tell you what it’s worth.” Anyway, he told me what it was worth. – ‘Cause the market boomed quite a bit– – Well, it boomed but also I
think there are separate ways in which we can try and grow
the yield on the property. One is capital depreciation
which we can’t control, two is by refurbing it, perhaps and three is growing the yield. And because I’ve managed
to shoot the rents up, the property value had
gone up exponentially. I mean I couldn’t believe I
actually told him he was rude when he told me what it was worth now. (Simon) ‘Cause it doesn’t seem right– – So how much did he
tell you it was worth? – 800,000. – In three years– – So, the purchase price was– – That’s a round of applause. (audience applause) And when you did the
option, it was worth 350 but obviously you’d increased the rent which has increased the value. And the market had done
really well as well. Okay, so that was some good news. That was a good phone
call to get, wasn’t it? – It was quite good, yeah. – Or you didn’t believe him? – I didn’t really believe him. – Okay, but obviously came
to the end of the option, you decided to buy it. Now, obviously, when you have an option, although it’s worth more, you buy it for the price of the option. That can cause some challenges and so on Sunday we have a talk with Scott about how you can prevent that problem. But obviously you bought at
the 340, the agreed price. So how did you fund that? – Okay, so what I did
was I got an investor to put the deposit in for
me to purchase that property and then a few months later, I refinanced 75% of it’s new value. – So worth 800, 75% is 600 so– – 600. – So in other words, you would
have paid back the investor plus (mumbles) and walked out with a couple of 100,000
pounds in your pocket. – Absolutely. Tax free, I love that bit. – Tax free, that’s right. (audience applause) Now, here’s the thing. I mean do all properties go up like that? No, they don’t but the whole
point is if you hadn’t, I mean there’s a great cashflow but if you hadn’t done that option, you wouldn’t have controlled it. You would have no possibility of having that gain, would you? – None at all. I think with options,
there’s so much power in that you have control
to create what comes next. Obviously we can’t control the market and whether there’s a capital depreciation but what we can do is control
what we do to a building. So, you control whether
you do refurb on it, whether you put different tenants in it, whether you up the rents in it. When I walked into the place, I knew that I could increase rent. So when the landlord said, “Why would you give me 1800 pounds?” ’cause at the time it would
have created 650 profit for me because the revenues when
I took it on were 2850. I knew I’d up the rents and I knew that over a period, maybe a year. I would get it up to a significant amount that then would grow the yield but also create the cash I
wanted each month from it. – Awesome, that’s a great deal. Give Gillie an amazing
round of applause, please. (audience applause) Thank you for showing Gillie. Hey, it’s Simon here. I just want to thank
you for taking the time to watch this inspirational case study. I’m sure you got a huge amount out of it. And if you wanna learn more about how you can use this incredible strategy, I’ve prepared two hour on-demand
online training for you, completely free of charge, to teach you what you need to know to be a successful HMO
investor and landlord. All you have to do is look in the description below this video. Click on the link and register to get access to that free training. I suggest you do it right now.

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