| by Kenneth Chase | 3 comments

Property Planning Gain from a Purchase Option Agreement | Simon Zutshi


– This is the way to
massively de-risk this, and make a huge amount of money. This is what I mean about
maximising your profit. Please put your hands together, so a massive round of
applause for Stephen Ray. (audience clapping) Steve. – Hi, Simon. – Thank you so much. Please have a seat. Okay, so. You got a great deal
you’re gonna tell us about. But before you do that, just tell us a little bit about yourself. A bit about your background. – I’m a printer. I’m 60 years old, and I
wanted a change of career. So yeah, you can do this
at anytime in your life. – Yep. – I wanted to better myself. I was talking to my friend Tim Matcham, and Tim who’s done this course
recommended I came on it, and it’s been a massive thing for me. – Cool. – I start getting emotional now. – Aw, that’s okay, that’s okay. You’re amongst friends. So thank you, and you’ve
done really well, Steve. So let’s talk about this deal, and give us a little bit of background on how you found this property first, but before I got through
any of the numbers. – Okay, so in the town I live, it’s a classic town where,
you know, people say, “I can’t do property deals
’cause the prices are too high.” So this is right under my nose. – Yep. – I knocked on the door. It’s just that the place
is a fantastic plot of land in a fantastic location
in a tired-looking house. And I thought, there’s got to be possibilities there somehow. So I just knocked on the door and said, “If you ever wanna sell,
I’ll be interested.” – So this was not on the market. – No. – But it’s when I knocked now. How many people would
walk past a property, oh that’s great, but do nothing about it? Probably the vast majority. So actually, it takes a bit of guts to kind of do something about it, right? – Well I did it again this week? – You’ve done it again this week? Well and you’re getting some good results knocking on doors aren’t you? – Yeah. – Do you want to tell us about
this week, what happened? – I decided I wanted to look at Cambridge in a little bit more detail, I went to the Cambridge PIN, I met Chris there for the first time. Where are you Chris? And I was walking the streets, take that how you want. – I thought you got into trouble last time for that but uh. – And I went into this one premises, and the owner’s daughter was there, we got talking and they asked me back the next
day to meet her mum, the owner. And her, the mum’s been
texting me this morning and this is an equally
large potential development. – Fantastic. – They’ve been appraised by the developers the other developers aren’t
doing the win-win scenario. – And that’s the thing I like
particularly about you Steve you’ve really embraced a philosophy about it’s gotta be a win-win. And you try and see what do they want? What’s important to them? Try and find the solution for them and if you give people what they want they’re far more likely
to give you what you want. – Yeah. – You’re a big advocate of that one. – Absolutely. – Yeah. Okay, so this was a
property in your location, you literally knocked on the door, would you be interested in selling it, and what was their reaction to that? – Yes, we want to but
maybe in a year’s time. – Okay. – I said okay then,
I’ll leave you my card. And then I was too embarrassed to go back (laughter) and ask them and on the Mastermind
programmes we get buddies my buddy Neil Chowdery
kept on badgering me and said, “have you been back,
have you been back Steve?” I said, “well no, no, I’m
not sure what to say.” – Was that that fear in your head, which we all have, yeah? – It’s that little voice. – The little voice, yeah. – So he pushed me and I did go
back about four months later, and I said I hope you, I
don’t know if you remember me and said, “oh yes, you’re
Steve, I’ve got your card here, we’re just about to ring you, we do want to proceed and
actually sell our house.” And so that was the
start of the discussion. – Excellent. Okay and so, and so obviously
you just buying it now, people might think, big developments want
you to go and buy it, get planning permission,
then develop the sale, but that would require
a huge amount of money but using a purchase option, you’ve got the opportunity
to control the property, do what you need to do and then buy it if you want to buy it, so. – Absolutely, yes. It’s the option, but not the obligation. – Absolutely. So, you’ve, now was it a pound? A 3,000 pound option fee. – That was the cost of their solicitors, so I’ve paid, I’ve agreed to pay the
cost of their solicitors which is 2,400 pounds plus VAT. – I’m guessing their solicitor
hadn’t done this before. – No, I recommended all the solicitors. – Oh, okay, that’s quite a lot for their? – Yeah, it’s their biggest deal, their original quote was twice that. – That’s a lot. – So once we narrowed, once we agreed what the actual terms were what they were doing, but I was actually
quite happy to pay that, it’s a good. – Yup, yup. – It’s not gonna to come back to me Simon. – No. – It’s a well written contract. – Great, okay, good. And then obviously fees went to, so when you have a
building or a piece of land you need to work out what
can actually be done on that, so talk to us a little bit
about feasibility study. – Well you can’t really
decide on what the value that the land could be with out actually doing some feasibility of
what you could put there. – Yeah. – And so I decided to
commission some professionals to actually look at the various options, houses, apartments, flats,
splitting the building, replacing with houses, I
think there were six options and we costed all of those six up. So they came out, they measured the land so that’s five grand including that, it’s a lot of money, but I just got this feeling that this place was just obviously
right for development so, but it allowed me to work back to what I
needed to buy the land for. – Yeah. So you look at the
gross development value, so what could you put on here, what would that be worth? Look at what profit you need in it. Normally it’s at least 20%
profit working backwards. Then work out okay what
are all the build costs and all the professional fees, the finance costs and everything work back to how much
you can actually afford to pay for the land. So that’s how you basically value what you could do with something. – Yup. – Okay, great. Obviously, your legal costs. – That’s my legal costs. – Now, purchase price you agreed 1.4 million pounds. – Yup. – Who sitting in the room before today might think they could never
do a purchase 1.4 million? Show of hands. You’ve obviously got more money
than I thought but you know. This is how you do it. Okay, so 1.4 million agreed, now you said that other
people had approached them cause there was other
people that identified it. – Yup. – And other people offered less, more? – 1.5 million. – So someone else offered more money? – Yup. – But why did they want to deal with you? – They had an uneasy feeling about them. – Right. – I was just trying to get a win-win I was trying to get help
them move on with their life. They opened up as to where they were going what they were doing. So it sort of all smoothed
into one nice process. – But coming at it from that approach about really wanting to ask them questions and understand what’s right for them and structure a deal that works for them I think people sense that you’re trying to
help them don’t they? – Yeah. – They can pick it up. – Yeah. – Yup, okay. – That discussion, on Mastermind you give you get given coaches. – Yeah. – And my coach you gave me, Paul Collier. – Yeah, who we’re gonna see in a moment. – Okay, who’s probably the best, one of the best in the UK and so actually Paul just helped me through this he was phenomenal and that’s the benefit of the Mastermind. – Yeah. – Programme. – Absolutely. Are there survey’s now? – Done those. – Architects, you don’t
have to do that right now if you’ve spent some money
now to get it to the point. – Surveys, I’ve just done
ecological, topographical, and arboreal, so you have to do those so the architects know
where the building can sit. – Yes. – We’re going, the
architects start in Monday, We’re going to pre-app
two weeks on Monday, and then we go into full
planning after that. – Fantastic. So not all of that planning costs, those architects is gonna be? – No, no because, in fact,
most of the architect’s costs are once you’re into
the real detailed drawings the actual schematics are actually quite, about another 5,000. – So you can often get
the initial planning, outline planning, and then you can sell it to someone with outline planning and
they can do the detail or you could do the detail yourself, yeah? – Yes. – Okay, so in other words
we look at all the costs and you wouldn’t put in
all the architect fees but add it all together
about 66,000 I think, which somebody might say, “whoa, I don’t have that money.” Doesn’t have to be your money. There’s a lot of profit in this, you could do a joint venture or just do a loan, get
other people to cash in. So now once you’ve got
the planning permission – Yup. – It’s gonna increase
the value of the land and this case to two million pounds based on what could build. What do you think, what do you actually want to put on there? What’s the best plan? – We’ve looked at so many options we looked at assisted
living, looked at houses, townhouses, apartments,
this town is very specific in the Worcestershires is a place where you go to once you
retire, that’s it’s niche. So it was the town, it was
the first town in Worcester where Waitrose put a store for the reason, you got lots of people, lots of time, with lots of money. So it’s going to be
aimed at the downsizers retiring who want an
apartment dead central, bang in the middle of town with a lot of beautiful
security and trees around so it’s private estate. – Yup. – But it’s the centre
location, you walk out the door and you’re straight in to the middle. – Fantastic. – Phenomenal location. – Great. So based on the end, what
you’re gonna do, the NGV, the lands worth two million. Now here’s an interesting point. – Possibly. – Possibly. Or more maybe? – Well it depends what
somebody’s prepared to give you. – Yeah. – So, it’ll be what it
is, but that figure. – And obviously, you get mixed evaluation based on what you want to do what they think it’s gonna be worth. – Yeah. – Yeah. So here’s the point. When, if you decide to
buy this and move forward, because the land could
be worth two million, and you’re buying for 1.4, that’s 70% you could come to someone
like CrowdProperty and in this case, CrowdProperty would give
you all the money to buy it. – Well actually they
helped me get this deal. I was at a property event,
CrowdProperty got us down there, and I was just explaining
I was in discussions, very early discussions, and they said would you
like a letter of comfort, letter of intent? I sent them my proposals,
my feasibility study, this thing that I’d paid for, which is really, that’s massively
important to these people. – Yup. – On the back of that feasibility study the very next day, they gave me a letter, that just said, “we’re
prepared to fund this entire scheme.” So on the Monday morning
when I went for a meeting, as Paul Collier taught me, you gotta bring out their fears, and so I said, “I bet you’re thinking, I bet you’re wondering if
actually I’ve got the capital to see this through.” I said, “just to answer that,
if that is a worry of yours, I’ve got this letter for you.” and I just put it across the table and just said nothing. – Yeah. – And they said, “great,
right now about the price.” (laughter) – Yeah, exactly. – So, they helped me get it. – And gain that confidence. Because if someone’s got a big house, a big house can take a
long time to sell, right? – Yes, yeah. – So that’s one problem. They just put it on the market and then also there are a
lot of idiots in property who look at things they can’t afford and they don’t know about
these kind of strategies, and you know, we all know
they’re out there so, they wanna make sure that
you guys aren’t idiots they want to make sure that
you can actually deliver so having that kind of support is pretty powerful, right? – It’s phenomenal. It was major part for me. – Gives that certainty, fantastic, okay. Now, let’s look at actually buying it, developing it so the land
cost with a stamp duty there, and the bill costs,
professional, warranties, professional selling fees, et cetera. – So it’s about four
million pounds to go through – Yeah, one thing, then the finance costs
is not on there yet. – It’s not no, one thing, anybody there who’s checking me out has said you can’t buy that
plot for 85,000 stamp duty, it’s actually one house
and two apartments. – Right, multiple dwelling relief. – Multiple dwelling relief. In case you want to catch me out. – Yup. – I’m sure Rich is trying to do it. – I was gonna ask you about
that but that’s good, okay. And obviously finance cost is where, depending how and where you finance it. – Yeah, I haven’t
included the finance costs cause I just, the slide which is like the profit as it were, it is for me it’s the stakeholders. – Yes. – So I include the finances in that. – Got it. So GDV one over five million and so all the stakeholders so including the people in the money 1.7, almost 1.75 million. – Well I didn’t take
the highest GDV figure. – Right. – I brought it down slightly. – So it’s kind of conservative. – Slightly. – Yeah. – It’s also, it’s gonna take me a year to build, so you know, I’m looking to be post Brexit on this one, I’m gonna be trying to
sell off plan as well for some of the others so
people can actually specify. – Yeah. – Cause this is luxury end, so people are gonna want to put their own. – That’s really important,
just make everyone’s got that. So when selling properties, rather than getting them all done then putting on the market and having all of them flood the market, it’s a really smart idea when you’re doing bigger deals like this to try and sell them off plans you get some computer
generated images, CGI’s to what it will actually look like, and then you can work with some of the bigger, better estate agents and there are people who
want to buy these things and the benefit for the buyer, they can come and exchange, cause their doing effectively an EDC they exchange contracts
they complete when it’s done they put down a deposit,
typically ten percent and their then committed to buy so it gives a lot of
reassurance to the developer and also the financers, that obviously there’s an exit strategy, and the reason people do it is, you know you gotta say, right, rather than getting a house that might not quite be right for you if you put down your deposit we will let you have a hand in how we actually finish it off. We might have three
different kitchen ranges with a certain price bracket you can pick whichever one you want. So someone gets a brand new property but tailor made to the kitchen they want, the carpets they want,
the tiles they want, and it feels like their own. Which means that their not all identical. Which is a really smart thing to do. And because they’ve exchanged,
their committed to buy so obviously you’re
prepared to tweak it to them cause they have to buy the property. – Well you can make profit on that because they generally
specify stuff you say, “Oh you can, you got this
band of kitchens to buy.” and they’ll say “oh no I want
go for that handmade one.” Okay and that’s fine but that will cost you an extra 20 pounds. – And it’s extra the add on, yes. – Yeah. – Absolutely, yeah. So most of the guys who do this always make extra money by the upgrades. – Yup. – Cause the people who are gonna buy these high end properties, they’ve got the money to do that. – Yeah, yeah. – And especially if it’s their
downsizing and retirement their gonna live here for life now they want it to be. – Yeah. – A great property. – Yeah. So that’s a huge amount of profit to make. And actually, the amount of money that you’re kind of putting in up front is 66,000 pounds, with the planning, the architect’s fees and everything. So who’d be prepared
to put in 66,000 pounds if the profit after taking out the finance I think was well over a million pounds Who’d be happy to do that? Yeah. Who didn’t hear the question? (laughter) Because again, if you think, well I don’t have the 66,000 pounds you’ve not been listening. It doesn’t have to be your money. And is there a little
bit of profit in there to maybe attract some other people in to get them to put the money in? – I would go and back some of you guys if you find the deal. – Exactly, exactly. And come join the queue Steve cause I’ll get in as well, right. (laughter) But here’s the point guys, how many people would not even bother to go and knock on the door? You gotta think differently. You gotta have the right tools. If you, could you, just go and buy this for 1.4 million Steve? Buy it and then get the planning push, you could do that, somebody could do that, but that’s not the right way, is it? – It’s a massive risk. – It is a massive risk. – Yeah. – This is the way to
massively de-risk this and make a huge amount of money. This is what I mean about
maximising your profit from these kind of deals. – And no, I haven’t got 1.4 million. – No you haven’t, no, okay. (laughter) (words banging)

3 Comments

LenDen UK

Jan 1, 2020, 4:55 pm Reply

Volume very low?

Imre Varga

Jan 1, 2020, 5:01 pm Reply

Low volume Simon!!

Simon Zutshi

Jan 1, 2020, 8:43 am Reply

To anyone experiencing volume problems, my team are looking into fixing this for our next series of videos

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