If you are like many others who have come to my site to learn how to make more money by investing with little or no money down in lease options, I have an exciting opportunity for you. I am now offering a FREE online DVD to help you Learn How to put $5,000- $10,000 into your pocket within 29 days using lease options . I am sure you may have concerns and may be wondering if it is even possible in today’s Real Estate market when you do not have:
Enough credit to purchase a property with a mortgage
If you do not have enough cash to buy or put down
You do not want to get stuck with a property you can not
Take a few moments from what you are currently doing and watch.
Typically buyers won’t try to negotiate price. They often accept your asking price (which includes a rent-to-own premium) because of the flexibility they receive by doing rent-to-own. However, should a buyer try to negotiate on price (and they will if they read my book, Rent-to-Buy) there are a couple of ways to counter them.
1. You want to emphasize the flexibility they are receiving by being able to rent the home before they buy it. This type of flexibility justifiably commands a greater price than a comparable home being sold conventionally.
2. You want to emphasize the rarity of what you are offering. Simply put, a buyer who is buying a rent-to-own home has very few choices in homes. There aren’t that many out there. This rarity also makes the home more valuable.
2. Option Fee
More than any other term buyers will likely try to negotiate a smaller option fee. In some cases they’ll do this because they don’t have enough money saved, in other cases they’ll do it simply because they don’t want to part with the money.
Obviously the more option fee you receive the better because it means the buyer is less likely to walk away from their money. When a tenant-buyer tries to negotiate a lower option fee you can counter it by:
1. Pointing out that the option fee counts as a down payment when they are trying to qualify for a mortgage and the larger the option fee the better it will look to the lender.
2. (If the tenant-buyer has poor credit) Explain that you are taking a risk by letting someone who can’t currently qualify for a mortgage move into your home and that the option fee is your security against that risk. Tell them that the option fee conveys their seriousness about the home.
3. Closing cost contributions
Typically at the beginning of the option period tenant-buyers won’t ask for or won’t know they need to ask for help with closing costs. This usually comes up at the point when they are applying for a mortgage and discover that they need to pay them.
This is when either their real estate agent or their mortgage broker will tell them that they can ask the seller (you) to help pay closing costs. The way this is usually handled is that the purchase price is increased to offset all of or part of the closing costs. Assuming that the home will appraise for enough to cover this.
You may have done this when you bought the home yourself, it’s a very common practice. By increasing the purchase price to cover closing costs, it’s mostly a wash for you as the seller. It does end up costing you a little bit with increased taxes, commissions, title fees and so forth based on the slightly higher selling price (maybe a couple hundred dollars depending on the cost of your home).
I recommend granting this concession if you can because it gets your buyers to buy your home. The cost to you is pretty small so it’s worth it to get your home sold. If you suspect that your home won’t appraise for enough to cover the closing costs because property values are going down in your market, you may want to encourage the tenant-buyer early during the rental period to start saving some money to cover their closing costs when they get a mortgage, this way you are less likely to have to add them into the purchase price.
In a recent post I discussed why Soft markets are GOOD rental markets to invest in. Now is the best time to buy Real Estate.
Here are the 3 best ways to Buy Real Estate in a Down Market:
#1 Lease Options Lease options are Great for down markets. The opportunities are plentiful because there are lots of sellers out there having trouble selling their homes. This means they are looking for alternatives, and what you can offer them with a lease option is a whole lot better than just renting out their home or having to do a massive price cut.
The other great thing about lease options in down markets is that you have extremely low risk. No matter what happens in the market you’ll come out okay, because you aren’t obligated to buy. But even if the market were to go down more you can always try to renegotiate with the seller and get a better deal so you can still close. To learn more about lease option investing visit my website at http://www.wendypatton.com
#2 Wholesaling A.K.A Cooperative Lease Options Cooperative Lease Options is a safe form of investing in down real estate markets, provided you have end buyers lined up before you close. There will be plenty of opportunities for wholesale deals, but the challenge may lie in finding your buyers.
If you are doing Cooperative Lease Options it’s a good idea to have a strong buyer list lined up. You don’t want to close on the property without an end buyer because you are in a down market. If the market continued going down you would be stuck holding the property as the value declined.
What I really like about wholesaling is that you can keep your risk level low by not having to own the property. You just flip it to your end buyer. Minimizing risk in down markets is very important. To Learn More about Cooperative Lease Options Click Here.
#3 Cash Flow Rentals Some down markets are positively flush with great cash flow opportunities. Down markets mean that the renter pool has grown as well. If you make sure the numbers work and that the rental market is strong you can do very well with cash flowing rental properties. Passive income every month is a great way to build your wealth.
While there is some risk associated with a rental property in a down market, because you do actually own the property you can easily mitigate that risk by making sure the numbers work before you buy. If a property cash flows you can hold it forever without having to worry about what the market does. To learn about some great cash flow opportunities, the same area that I’m buying in right now, Click Here
As an investor you must determine your bottom line to do a deal. What is the profit you would expect, minimally, to do a deal on a lease with option to buy or Subject to investing technique? For each type of investing technique you might have a different profit amount required. For instance, I will accept less for a rehab than a lease option, because it can be completed and out of the deal within a few months, whereas a lease option I will be in the deal for 12-18 months or more. Is your profit range for a deal $10,000, $50,000 or $300,000? Once you determine your bottom line then you can determine what you will and will not do for a deal. For instance, if your bottom line is $20,000, and a deal comes along that will only provide you with $18,000, then you need to pass that deal up, or negotiate more to get you your bottom line, otherwise, it is not be a win/win with the seller and yourself. You also might be able to wholesale it to someone else who has a bottom line that is less than your bottom line, but you will need to learn to walk away from deals that don’t work for you.
A Sandwich Lease Option is a technique that has been used for many years but the technique has been overlooked by many. To me it is the hidden gem of the real estate investing world. When executed properly, you the investor will make money with the option fee, the back end and a monthly cash flow. This means you get paid THREE ways. Essentially, you lease a property with an option to buy it, and in turn you rent it out to someone else, also granting them an option to buy it. You are in the middle, hence the reason we call it a “Sandwich Lease Option“.
Here is a picture of a sandwich lease option. Note: On a lease option only the seller is obligated to sell. The buyer has the “option” or privilege to buy, but not the obligation.
And where is the meat in a sandwich? In the Middle. The meat is the best part of the sandwich lease option. This is where we want to focus. How can we make the sandwich more profitable (by getting more meat in the middle)?
Here are some of the terms to negotiate when buying (with the seller) and selling (with your buyer):
Monthly Fee (Rent)
Length of time (Years)
Price
How much of the monthly fees (your rental payment) goes towards the purchase price
When you negotiate good terms with your seller you are making your sandwich lease option better; like adding a piece of cheese (this is more profit to you).
Cooperative Lease Options are a technique that I recently began teaching my students. A Cooperative Lease Option A.K.A Wholesale Lease Option is similar to a Sandwich Lease Option except the middle (meat) is removed up-front. Think of it as a sandwich where the meat has been removed. I know, many of you are thinking what is a sandwich without the meat? In other words how will you benefit from the deal?
Basically, you still find the seller and after you have the contract and the option to buy, you ‘take the meat’ and assign your option to purchase to a buyer. In this scenario, you only get paid in one way (the assignment of your option) but you get paid today. You don’t make as much on the deal, but you are done with it. It is quicker and easier money then a sandwich lease option.
It is important to remember when doing a Cooperative Lease Option NOT to find the buyer for the seller. It might sound like you are doing that and in essence you really are, but you can’t describe it that way or explain it that way to your buyers and sellers. You are the buyer and you are “assigning” your contract to a buyer for a fee from them to buy your contract. For example, I usually take the buyers option fee as my assignment fee for a wholesale lease option. This can be anywhere from $2500-$10,000 in my area of the country. Can you use an extra $5000 this month? To find more information on becoming a Realtor you can check out my article on getting your license HERE.
Rapport building is very important and key because you’re asking someone to give you control of their house with little to no money down in both lease options and subject tos. Getting the seller to feel comfortable with you is the most important technique to learn for these techniques. This is equally true with Realtors. If the Realtor likes you, they will translate their like and trust of you to the seller for the lease options.
Here’s a tip: When you’re in the seller’s house, tell them what you like about their house, not what you don’t like. For example, perhaps you’ll see something unusual, like older wood work or a nice fireplace. Ask the seller about it. If you see that the seller likes golf, talk golf whether you like golf or not. Always focus on the positives, the interesting things. People like to know that you like their house, and that builds immediate rapport. Sellers will give you a better deal and be more likely to negotiate if they like you.
Check out Chapter 06 of my book Investing in Real Estate with Lease Options and Subject-to Deals: Powerful Strategies for Getting More when You Sell, and Paying Less when You Buyto learn more about negotiating the deal and other steps to buying on Lease Options and Subject Tos.
In a rent-to-own sale the seller allows you, the future buyer, to live in the home for a while as a renter before you actually purchase the home from them. Before you move into the seller’s home as a renter, you and the seller would agree on the sale price and other terms. You would pay the seller a non-refundable option fee. Both you and the seller would sign some paperwork covering the lease, the purchase and the option
Once you have been approved by your seller, you have a few little details to take care of. You know things like moving into your new house, signing contracts and so forth. Here are a few tips from my bookRent-to-Buy that will help you.
Create a Folder for Your New Home
I strongly recommend that you get a file folder and keep all of your documents in it. This folder should have copies of all your contracts and paperwork. You should also keep copies of all payments, receipts, etc., in the folder during the lease period. An important part of being able to get a mortgage at the end of the rental period is having organized documentation to create a strong paper trail.
Draft All Documents: Rental Agreement, Sales Contract, Option Agreement, Memorandum of Option and Affidavit of Liens
Prepare the contracts before you move in so that you have everything ready to go. All of these contracts are available in my companion course, ‘Rent-to-Buy’, which is available in the “Wendy’s Store” section ofwww.WendyPatton.com. I go into detail on this in my course with an audio step-by-step instruction CD to assist you.
Check if Taxes Have Been Paid
You’ll want to make sure the seller is paying their property taxes and that they are current. If the seller has a mortgage, there is a good chance that the lender requires an escrow account to cover property taxes and insurance. In this case, you’ll probably be able to verify that the taxes are current when you verify that the mortgage is current. However, not all mortgage lenders require an escrow account, and some sellers don’t have mortgages. In this case, you’ll need to verify from another source. Usually, you can check with your local Tax Assessor’s office (or whatever it is called where you live) to make sure the taxes are current. Many assessors’ offices now allow you to do this online. Otherwise, you should call the office.
Sign All Documents
It’s time to meet with the seller and sign all of the documents. Typically, you would do this before you move in. This allows you to lock in the deal and prevents the seller from finding another buyer. You would pay the option fee to the seller at the time all documents are signed. You might pay the rent and security deposit to the seller at this time as well or when you take possession of the home. Bring a pen or two!
Rent to Buy is currently available. Rent to Buy is your hands-on guide to buying your next home as a rent to own. You can get your next home NOW without having to qualify for a mortgage until later. This is the solution you need until you can qualify for a mortgage. This is the solution home sellers need because they can’t find mortgage qualified buyers. Rent to Buy is a great option in our current real estate market. Check it out!
Now is one of the best times I have ever seen for buying and selling homes as lease options or rent to owns. Real estate market conditions are practically ideal for this type of real estate investing. There is a glut of homes on the market forcing sellers to consider alternatives to selling their homes. Many sellers think their only choice is to rent their home if they can’t find a buyer.
Since their minds have already gotten past the hurdle of having renters in their home they are the perfect candidate for selling on a lease option or rent to own. They may not know about selling their home as a rent to own, but they need it. This is the time when lease option investors should be going out and putting together lots of deals. This is the time when real estate agents should be learning how to put together rent to own home sales to help their buyers and sellers.
Financing is harder to get now than it has been in quite some time. This means that many would be buyers are getting left out because they can’t qualify for a mortgage right now. There are lots of potential buyers out there like this right now. Every time I post rent to own ads on Craigslist I get tons of responses. It’s so funny when I hear people say there are no buyers right now. What they mean is there aren’t many conventional buyers. Lease option buyers are everywhere right now. This is also the time when rent to own investors should be making use of free marketing to attract buyers. Real estate agents should be doing the same thing. In this kind of market if you have the buyers you are golden, even if they are lease option buyers.
As I said now is the time for rent to own or lease options. This is one of the greatest times there has been for lease option investors to be putting together deals. This is also a great time for real estate agents to learn how to do rent to own sales and really boost their business.
I am getting really excited about this free webinar tomorrow night. If you are a rent to own or lease option investor, real estate agent or home seller this is important for you. If you want your buyers to close on the home you need to have them improve their credit. If you leave it up to them they almost never get around to it. You will need to help them along to get their credit in shape so they can qualify for a mortgage and purchase your rent to own home.
Not only will we look at whether credit repair companies work or if they are just a scam. We will also take a look at how credit scores are generated, what factors affect them and some common misconceptions about things you can or cannot do to improve your credit. You will be surprised by some of the information. There are a lot of myths out there about rebuilding credit and some of those myths can acutally hurt your credit not help them.
Not only is this information useful if you have a rent to own or lease option buyer but it can also be useful for you if you need to work on your own credit. Remember, the webinar is scheduled for tomorrow night, Wednesday, April 29th at 8 PM EST. To register go to my Wendy Patton site, under webinars.
