Real estate investors would love a real estate option on bank owned properties (REO) because the banks are swimming with them and are selling well below market value. Unfortunately, banks are not allowing our favorite real estate option - the lease option. And I don't expect them to anytime soon.

Some banks are beginning to rent houses until they can sell them. However, they are using property management companies rather than allowing lease options. The reason being is the banks are not staffed to manage property and certainly don't have staff trained to manage lease options that involves dozens of real estate investors. The fact remains a cash purchase is your best real estate option for acquiring REO.

Cash Purchase Is Your Best Real Estate Option for REO

This real estate option is a challenge for the beginning investor short on cash. However, depending on your location, many of these properties are selling well below market value and offer a big upside if you can exercise a cash purchase real estate option.

This real estate option is such an opportunity that if don't have cash but can obtain financing or find a partner with cash, I recommend pursuing a cash purchase. Once you own, you can than maximize your cash flow and long term profit by offering a lease option.

You'll maximize your cash flow and profits by offering a lease option because there are so many people wanting to buy but can't obtain financing. When you offer financing assistance as a real estate option to buy, you dramatically increase your potential buyers market to include those willing to pay above market value for the opportunity to own through a lease option.

Another Real Estate Option for Agents

Some agents might want to explore starting a property management side business. If you can contract with a bank or two to rent and liquidate REO, it will be a big boost to your business. A property management contract for REO gives you a major insider advantage to the best REO deals the bank has without needing to make cash purchases.

After you establish a track record with the bank, you could even broach the subject of allowing you exclusive rights to begin offering lease options controlled by your business. Remember, banks aren't going with this real estate option because they don't have staff trained to management and don't want leases options with dozens of investors. Being the single contact for lease options and being the only investor contracting with potential end buyers could open this lucrative opportunity for your business.

What are you seeing in your REO market? Lower inventory right now? Write a comment or ask a question. It's always a pleasure to hear from readers.

I have not blogged in sometime and I have not looked for my own rent to buy deals for sometime, until this past weekend. I realized that making deals and structuring rent to buy deals is something I really love. Real estate investing is in my blood - especially rent to buy deals. Rent to buy deals are also the most profitable thing I can do right now.

I looked at approximately 15 homes and made offers on 5! As an investor, it's highly unusual to find that high of percentage of houses to make offers on in that short of time. It just goes to show how hot the current market is for investors. The rent to buy market is just as hot!

 

Rent to Buy Deals on the MLS

Here is one deal that I found this weekend - right on the MLS!

$34,000 - brick home with 3 bedrooms, 2 baths, basement and garage. It has good schools and in an all brick area. It is NOT in the hood or in Detroit at all. I can rent this home for around $1100 per month or do a rent to buy for around $99,000. So? Why am I not doing more of these rent to buy deals? Great question! I am kicking myself right now, as I haven't done enough rent to buy deals lately.

But I'm back in the saddle both doing my own deals and sharing with students and readers here on my blog. Just as I thought, this is a great time to be investing. It's a buyers' market with the added benefit of being great to rent or flip houses with a rent to buy program.

Might be a Round Trip With This Rent to Buy House

I also put an offer in on one for $27,000 that I sold about 7 years ago for $132,000. Imagine doing so many deals that you start to buy back your old inventory . I could sell that one on a rent to buy contract for close to $100,000.

So you might ask, "Why would someone sell it to me for that low price?" Cash is the secret weapon in today's market. Very few buyers can make all cash offers. Distressed sellers want to sell now. They could accept multiple offers for considerably more than my offered but their chance of closing the deal is slim.

In today's market, the seller has two big challenges when it comes to a financing contingency. First, lending standards are so tight with banks that most people can't qualify for a loan. That's part of the reason there are so few buyers in the market. Of course, most realtors require a buyer to prequalify before they'll spend time showing houses.

So, you would think the buyers in the market would make a similar low ball offer to what I made and the seller would accept the higher of the two, knowing the other buyer is prequalified. Nope, cash is still king. When you can buy with cash, you can run a very profitable rent to buy program.

You see, those with a financing contingency need to have the house appraised. Lender appraisals are like the loan standards. Appraisals are very conservative now and some even assume the market has not found the bottom. So again, the financing contingency is not a sure deal for the seller.

On the other hand, my all cash offers have no financing contingency and don't require an appraisal. And there's no lender anywhere in the deal. It's just me and the seller. We can close the deal in two or three days if the seller needs to get out that fast. And I can move on to my next rent to buy deal.

I hope several of my offers get accepted. I'm excited to turn them into rent to buy deals.

I also have a Realtor team if you want one of these rent to buy deals yourself - let me know. There are enough out there for you also.