Screening a buyer for a lease option is extremely important and yet some of us investors still go by instinct or illegal decisions.   There are two areas to discuss on screening;

1)       Detailed Screening

2)       Fair Housing.

‘We liked them’, some investors will say to me.  There are too many really good liars in the world and those of you that feel you can ‘read’ people and relying on that are in for a rude awakening.  Many of my worst situations came from my own ignorance of believing in people.   We should all screen people as if we were blind and deaf.   We would then screen them strictly on the facts and not our opinions or prejudices.

Screen a tenant by reviewing the application in my course.  Have them fill it out.  Check it for accuracy.  Make sure they did not lie to you.   If someone lies to me, they are denied the occupancy.   Check their name – get a copy of their driver’s license.    Check their employment – I confirm the pay amount, hours they work and time on the job.   Check their banking information, you might need it later.  Also check their landlord history , the current land lord may want to get rid of them, but the previous has nothing to hide.  Call them both!   Confirm it is the real landlord by one of two ways; check it on county records, or call person and say a different amount of rent than on the application.

Fair Housing:

Fair Housing is an entire seminar in itself.  Realtors around the country have half to full day training sessions on this topic alone.   Fair housing rights when violated can cost owners hundreds of thousands of dollars.  This is not an area where you want to mess up.  The bottom line is this: select a tenant on their application alone and nothing else. There are federally protected areas and there may be some state protected categories also.  Each state has their own protected areas, so check your state for the details.  The way to be really safe is don’t judge anyone by the way they look or talk. This is why I say that we should be blind and deaf to select a tenant.  If we would just evaluate on the application process alone, then we would stay out of trouble.  Then the selection would be based truly on the facts not our gut feel or our instincts.  Besides, many times we think our ‘intuition’ is that someone is ‘good’ and they later are not so ‘good’.   Stick with the law and you will be safe.

As you can see screening a buyer for a lease option is highly important. For more information on How to Screen a Buyer and putting your standards in writing you can check out my book Investing in Real Estate with Lease Options and Subject-to Deals. Stay tuned for the next topic How to Qualify a Good Buyer.

Share with me some of your tips on How to Screen a Good Buyer in the comment section!

Down markets are without question one of the best times for real estate investors. Down markets contain the best opportunities and the greatest ability to make money. Any truly successful real estate investor will tell you that they do more deals and make more money in down markets than they do in up markets.

Here is what Billionaire J. Paul Getty had to say about investing in down Market:

“If you want to make money, really big money, you do what no one else is doing. Buy when everyone else is selling and sell when everyone else is buying. This is not merely a catchy slogan. It is the very essence of successful investment.”
J. Paul Getty – Billionaire

While the opportunities are great in down markets, investors need to be aware of some of the deadly mistakes that can occur.
Here are the Top Three:

1. Not Getting Cash Flow
Cash flow is king, especially in down markets. It’s harder to get cash flow in seller’s markets, and even in some areas of the country, in a buyer’s market, because the prices are still too high for area rents. In down markets it’s very important to make sure your properties provide cash flow. You can’t count on appreciation in the short term in down markets. If a property cash flows, you can hold it forever, no matter what the market does. So, if it stays a down market for a while, you are okay because it cash flows. If the market goes back up, you can make money off appreciation too. Sell it then if you choose. The choice is yours then, because you’ve got the cash flow. CASH is KING!

2. Making Excuses
I touched on this before. If you want to succeed in real estate, you have to set aside the excuses and do it. Excuses are typically hidden in reasons why you can’t do it now. “I’m too busy.” Or the fear to take action by over analyzing every deal, “This property makes $5 less per month in cash flow than I really want.”
You’ve got to take action now. Picturing in your head all of the money you’ll make and the better life you’ll have with real estate investing is only fantasizing. If you want to make money in real estate; get started, take one step and then another. No one expects you to do it all at once or even do everything right, just get started.

3. Not Using a Proven System
There are some things in life we have to learn for ourselves. Making every mistake possible in real estate, just to learn the right way to do something is not one of those times. If you try that route, it will take you so much longer to get anywhere. You will literally be years behind, if you don’t give up entirely. A proven system is someone else’s road map that you can use to learn a real estate technique.
Proven systems give you the opportunity to skip the “getting lost” part. They move you forward at a much quicker (and safer) rate than if you tried to do it all on your own. It doesn’t matter what type of investing you want to do; short-sales, rehabs, or lease options, they will save you tens of thousands of dollars in mistakes, legal fees, etc.