The lease purchase is a neat and highly effective sales concept for many reasons.
One is the lease purchase is a way to get a pseudo homeowner into the property
before they actually buy the property. That's because the lease purchase
arrangement assumes the tenant will eventually buy the house. Because of this,
the lease purchase contract shifts much of the maintenance and repair
responsibility to the tenant. Even if the buyer doesn't eventually make the
purchase, they often keep the property in much better condition than a renter.
This can include the taxes and insurance on the property. Also, you don't get
the landlord calls in the middle of the night to unplug a toilet.

Lease Purchase - The Workings of the Contract

Buyers and sellers are free to write almost any clause they want to into a lease purchase agreement as long as they stay within their state laws. It's always a good idea to have a real estate attorney involved with your first several lease purchase agreements.

With a lease purchase, the seller and the future buyer typically agree on the future price of the house. One option is to set the price at today's market value with an inflation or market escalation clause tied to a reliable and specific index. It's common for the purchase price to be about 10% above market value.

Lease purchase offers the seller the highest sales price, a high option payment, the highest rent, and the least expenses. Lease purchase is the way to go.

The next major step in setting up a lease purchase agreement is establishing the cost of the option. Some sellers include the option price in the down payment if the buyer exercises the purchase option. Most don't. The option price in a lease purchase is substantial. This is how the buyer gets skin in the game and is a major motivator to completing the entire lease purchase.

Lease Purchase Benefits for the Buyer

The buyer in a lease purchase arrangement gets to 'test drive' the house, the neighborhood, and the school district. Depending how the contract is written, the buyer may have the price locked in for years in a rising market. This isn't a bad thing for the seller because the more value the buyer has in the property, the more motivated they become to complete the lease purchase process. If the market falls to far the buyer will walk away.

Although the option money doesn't usually apply towards the down payment, a portion of the rent normally does. This benefits both the buyer and the seller. In today's world, many people find it almost impossible to save money towards a down payment. Having part of the rent go towards the down payment is a way of forcing a buyer to make it happen. For the seller in a lease purchase, applying a portion of the rent towards the down payment is no big deal because the rent is set above market value. It's all upside for the seller. If the buyer doesn't execute the purchase, the seller keeps all of the above market rent. If the seller does go through with the lease purchase, the seller has sold the house at an above market price and collected the option money up front.

While technically the buyer is required to make the purchase in a lease purchase agreement, it's important for the seller to be reasonable. If the buyer walks away, it's likely because they can't afford to make the purchase or can't qualify for a loan. The seller may feel they want to compel the buyer to complete the purchase but it's probably unreasonable to do so. It's better to accept that you've made a bundle in option money and high rent and just start the lease purchase process over again with a new buyer and new option money.

Learn from my more than 20 years of experience in the real estate investing business including specialized lease purchase training at wendypatton.com.

One question that comes up early in lease option student training is how to get a lease when putting together a sandwich lease option deal. When you are trying to figure out how to get a lease, you need to start by looking for motivated sellers. Yesterday, I posted a bog about buying short sales. That's one of many ways to find motivated sellers. And there are many others.

In this blog, I'll answer the question how to get a lease by explaining how to use craigslist and scouring neighborhoods to find motivated sellers that you can bring into a sandwich lease deal.

How to Get a Lease Using Craigslist to Find Motivated Sellers

Craigslist has nine subcategories under the main category of Housing. When working at how to get a lease, you want to be active in 'apts / housing' and 'real estate for sale'. The apts / housing subcategory is where you find landlords advertising houses for rent. This isn't intuitive because you're looking for motivated sellers, but they exist in this subcategory. How to get a lease in this category involves looking for key words in the advertisement indicating the owner is having trouble finding tenants. Common indicators are words like 'rent reduced', 'no deposit required', 'second month free', etc.

When lease option students begin using this technique, a second question I often get is assuming they figure how to get a lease, how will they possibly rent it for more than the current owner is asking for? What you need to remember is with the lease option, you are going after a different audience. The second part of the sandwich lease are people that want to buy a house but can't qualify for a traditional loan. These are not people that want to rent - more about this in another blog. Right now we're concerned with how to get a lease.

The second category on craigslist is 'real estate for sale'. Discovering how to get a lease in this category involves the same technique, looking for key words in the advertising indicating they are motivated to sell. Words like 'price reduced', 'NEED TO MOVE', 'ALL OFFERS CONSIDERED', etc. Notice how some of the ad headlines are in all capital letters. These are people doing everything they can think of to grab your attention. The other clue you are looking for are owner financed houses. These people are more sophisticated sellers and will understand what you are trying to do with a sandwich lease.

The next step in how to get a lease is nothing more than starting to make phone calls to these people and explaining your proposition. However, there are many ways to find motivated seller when you are trying to figure out how to get a lease. Another is scouring neighborhoods for abandoned houses.

How to get a lease can be done by driving around looking for abandoned houses

How to Get a Lease Scouring Neighborhoods for Motivated Sellers

The picture I selected is a little over the top when it comes to learning how to get a lease by looking for abandoned houses but I wanted to grab your attention. How to get a lease for abandoned house is going to involve properties in better shape than this one. But you'll be looking for places needing minor repairs, the landscaping is in bad shape, and there are old notices tacked to the front door. Places that people can move into with minimal repair but that are clearly abandoned.

Once you find an abandoned house, the next step in how to get a lease is finding the owner. This is done by searching the public tax records. Most counties now have these online. You need to Google something like 'Oakland County tax records'.

I hope this blog helps you find a couple of more ways about how to get a lease that you can turn into a profitable sandwich lease.

Also, take advantage of my Free Book Offer and Video Training for finding motivated sellers and to help you find more ways about how to get a lease. There is valuable content in all of these resources I'm providing to you free. By taking advantage of them, your chances of learning the best ways of how to get a lease improve greatly.

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