The humor in the blog came from a thought that you can learn how long a house has been vacant by looking in the refrigerator. This picture of pizza slices isn't extra cheese. It's petrified cheese from being in a warm fridge for probably 2 years or more. At least that's how long the owner finally divulged.

Petrified Pizza is an indication it's time to consider a lease purchase

Now back to our lease purchase lesson.

Lease Purchase When a Short Sale is Slightly Below Market Value

The house I went see about a short sale had been kept up by the owner since it went vacant a couple of years ago. That can make it attractive for a lease purchase because neither the seller nor an investor needs to sink a bunch of money into repairs.

When a seller can't get the lender to approve a short sale they can try a lease purchase. But only if the value of the outstanding loan is close to the current market value or the lease/monthly payment will cover the current monthly loan payment.

I think you see where I'm going with this. A lease purchase it typically for more than market value. Typically about 10% more. So if the house value is within 90% of market value, the seller can use a lease purchase to put a tenant in the house at a monthly payment covering his or her loan payment during the lease phase. When it changes to a seller financed mortgage payment, the monthly payment will still cover the seller's original loan payment. Finally, when the lease purchase balloon payment comes due in a few years, the seller pays off the original loan in full.

There's a possibility this can be done even if the market value is a little less than 90% of the original loan. A lease purchase comes with an above market interest rate. The interest portion of the monthly payment can conceivably make up another few percentage points that the house value is below the outstanding loan.

Investor Version of a Lease Purchase With a Short Sale

The previous example is a creative use of a lease purchase bailing out a seller that can't get approval for a short sale. The investor version of a lease purchase is more common and done more frequently.

It's simply negotiating a short sale for well below market value. This can and is done frequently. The reason is that the short sale costs the lender significantly less than a foreclosure. The lender avoids all of the legal costs. They never take possession of the house so they never have to pay taxes, maintenance, and other associated costs.

There can be a nice profit when an investor buys a short sale and flips it with a lease purchase. Negotiating a below market value short sale and then selling for about 10% above market with a lease purchase can create a nice spread that becomes all profit for the investor. Sweetening the deal is the above market interest rate the investor will collect monthly until the lease purchase balloon payment comes due.

Oh, one more comment about the pizza. When I opened the frig and noticed the power was on and there was a large bottle of Mountain Dew along with the pizza box. I should say the power to the frig was on because there was a light that went on, but the frig was not cold. I did the unthinkable - OPEN THE PIZZA box. What I found was GREEN/YELLOW petrified pizza in there. The funny thing was it was so old it really didn't smell bad anymore. I am still wondering exactly what type of pizza it was originally . I started to laugh and asked if I could take a picture for my blog. The seller thought that I was quite crazy I am sure, but I found it the funniest thing that happened in my day.

Learn to laugh at the small things in life that can keep you going. This business does have some weird things that happen, learn to enjoy them.

Thanks for reading the blog. Your turn now, please leave questions and comments below.

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!

Start Your Rent to Buy Program Today!

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.

Buying a home is almost always an emotion-based process. Once you find a home you like, you become emotionally attached to it. Emotional attachment can cause you to make unwise decisions when making an offer, handling negotiations, and so forth. Once you’ve fallen in love with a house and visualized it being your home, you’ll start to do WHATEVER it takes to make sure it becomes your home.

This is about the worst possible way to buy a home, but also may be the best possible home for you.  You do want to fall in love with your new home, but you also want to be careful.

You can literally cost yourself thousands of dollars, if not tens of thousands of dollars, by being too emotionally attached. Instead of letting emotions rule the game, try to include some common sense in the buying process. Real estate investors have a saying that goes, “Don’t fall in love with the house, fall in love with the deal.” This is easier for an investor as he won’t live there, but you should be aware of this, and use your head.

Having said that, I realize that you will always have some emotional attachment to your house. You need to like it. Your goal is to strike a balance between liking the house and using common sense to tell you whether you are sacrificing too much to try to get the house. If you find you have to make lots and lots of compromises to get a house, stop yourself and ask, “Is this really worth it?”

Remember to strike a balance between emotions and common sense in your home buying process. It will help you enjoy your home that much more once you actually move in.

While you are looking at homes and once you make an offer on a home, there are some questions you should be asking yourself to help keep common sense involved in the decision making process:

This list is in now way complete. I invite you to add more questions in the comment section.

Here are five IMPORTANT questions to ask yourself:

1. Does the home work for you and does it meet your NEEDS
Remember the difference between wants and needs?
2. Do the numbers work for you?
Can you really afford this home?
3.  What sacrifices are you making to get this home?
It helps to think specifically about what you might be giving up for this particular home.
4.Will the home meet your needs for the near future?

Will your family be growing?  Are the kids going away to college?

5. Will you still want to mow that big back yard in a few years?

If you know that you are the type of person who easily becomes emotional in your decision making process, it might be a good idea to carry a note card with these four questions on it to remind you while you are looking!

Remember to strike a balance between emotions and common sense in your home buying process. It will help you enjoy your home that much more once you actually move in.

Now that we’ve discussed ways to find rent-to-own homes, what would you say to having rent-to-own sellers call you and offer you their home? That’s right. You can just sit by the phone and wait for sellers to call you and tell you about their rent-to-own home.

Many of these sellers will not have their homes listed with a real estate agent, so if you are working with an agent, this may not be for you.

The advantage of having the seller call you is that you already know he is willing to consider rent-to-own. You just need to figure out if his home and terms will work for you.

“Alright Wendy! So how do I do this?”

Posting ads is a way to get sellers to come to you.

Posting Ads

The first way is by posting ads about yourself and rent-to-own. Here is one example:

This is a sample ad of what you would put in the newspaper where space is an issue – the more space you use the more it costs you. These ads though are just enough to get the attention of a home seller who has started to think about what choices he must make if he doesn’t sell soon.

You can also post an ad on FREE sites like Craigslist, Yahoo! groups and Google groups. I also recommend posting some flyers on community bulletin boards as well as posting flyers using these FREE Internet sites. These methods are much cheaper than the newspaper classified ads and may be all you need.

The whole purpose of these ads is to filter out the home sellers who don’t want tenants and to get the ones that would consider tenants to call you.

Here are some questions you can ask sellers once they call you:

• Where is your home located?
• Can you tell me what price you are looking to get for your home?
• How many bedrooms and baths does it have?
• Do you know what the rental rates are in your area? About how much were you thinking for monthly rent?

Not only will these questions help you gain more information about the sellers, it will also help you build rapport with the seller as well.  Check out my book Rent-to-Buy to learn more about other ways to get sellers to call you.

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.  To Learn more about Option Agreements purchase your copy of Rent-to-Buy today.

Feel free to comment and let me know of other ways you  have sellers calling you!

Most good Rental Agreements take the guesswork out of the picture for you, making your life significantly easier. They do this by having all of the regular terms and conditions pre-printed. One important thing to remember is that you should NEVER draft your own rental agreements (or any other contracts for that matter) from scratch. Always use pre-created contracts (preferably pro-buyer) and just fill in the relevant details. Creating your own contracts can cause you enormous headaches and potential legal problems.

There are three different types of contracts:  Pro-Seller, Neutral and Pro-Buyer. You, as the buyer, will want pro-buyer contracts for your transaction, whenever possible. You can order these on my website if you don’t already have them. They offer you the most protection and the most favorable terms.   The type of contract can make a HUGE difference.  If you use the pro-buyer contracts, the seller is responsible for all repairs, or you can choose to share the expenses. Using a pro-seller contract or a lease from a real estate agent could result you might end up being responsible for ALL repairs to the property during your rental period.

Here are a few clauses you will find in my rental agreements that make them pro-buyer.

Insurance

It’s very important that the owner continue insurance. He or she is responsible for insuring his home during the rental period, not you. You will want to obtain renter’s insurance to protect your possessions, but the home itself must be insured by the owner (seller).

Maintenance, Repairs or Alterations

The Landlord gives the tenant the right to make repairs or improvements to the property at the tenant’s expense. This is where you will want to put in who will pay for what repairs. I personally like the owner to pay for repairs during the option period when I am the buyer.

Rental Payments

It is very important when you are doing a lease option that you make SURE the seller is paying his mortgage payment.  If he doesn’t pay it, your dream will become a nightmare.  I recommend you have your monthly payment made to their mortgage company versus to the seller directly.

Check out Chapter 7 of Rent-to- Buy for more insight into Rental Agreements.  Rent-to-Buy is a great gift for the Holiday's.  Order  your copy  TODAY!!

It is important, however, to get an idea of your needs before you go out looking at homes so you aren’t just floundering around. It’s okay to refine your needs as you are looking at homes and think more about your future home, but decide on your basic must-haves beforehand.

Here are some basic needs you’ll want to consider:

1. How many bedrooms and How big do they need to be?
2. Do you need a garage?
3. Do you need a basement or other structure for storage, like a shed (of course, you don’t want a basement in Florida)?
4. How many bathrooms will be needed?

Think also about the specifics of your own situation. Will you have an elderly parent living with you? If you or a family member is physically disabled, can the home be two stories or should it only have one? If you have small children, do you need a fenced in yard? It’s impossible to cover every particular situation, but you know better than anyone what applies to the needs of your family.

Once you have established your basic needs for a home, it’s time to think about features you want. Check out chapter 3 of my new book Rent- to-Buy for an in dept look at how to establish your needs and wants.

Before we can look at why we would want to buy a home and how to buy a home on a “rent-to-own” basis, we first need to understand what renting-to-own is. A rent-to-own can also be referred to as a “Lease with an Option to Buy,” a “Lease Option” or a “Lease to Own.”  In this book we will call it a “Rent-to-Own”, but these words can be used interchangeably for the most part.

In a nutshell, a rent-to-own sale means the seller is allowing you, the future buyer, to live in the home for a while as a renter before you actually purchase the home from them.

In a rent-to-own transaction, 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 (which gives you the right to purchase the home at a later date) and in approximately one to three years, depending on your agreement, you have the option of purchasing the home.

I say you have the option of purchasing the home because it is important to understand that in a rent-to-own transaction you, as the buyer, are not obligated to purchase the home at the end of the rental period. The seller, however, is required to sell it to you should you choose to buy it. That sounds pretty good, doesn’t it? For a more in dept look  at Rent-to-Own’s check out my new book, Rent-to-Buy.

With the severe tightening of the mortgage lending industry, buyers are having a harder time getting mortgages. The subprime mess we’ve all heard about means that many buyers who could qualify for mortgages before are no longer able to. This may be your situation.

This “Credit Crunch” directly impacts you as a potential homebuyer. Unless you have A+ credit or a very large down payment, getting a mortgage may prove difficult. If you haven’t already spoken with a mortgage broker, you should do so to find out if you can currently qualify for a mortgage. If you have already spoken with a mortgage broker and you know you can’t qualify yet, you know about this “Credit Crunch”.

Many would-be buyers despair after talking to a real estate agent and a mortgage broker who tell them that they can’t help them because they can’t qualify right now. This is why you, as a buyer, would need to do something like rent-to-own. It gives you the opportunity to get into your future home now, before you can qualify for a mortgage.

You can learn about How the “Credit Crunch” affects You- The Buyer and more in my new book Rent to Buy. Rent to Buy is your hands-on, step by step, 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!

You’ve seen tons of homes for sale on the market.  You know it’s a buyer’s market.  You either owned a home previously or you are a first time buyer.  If you owned a home previously you might have lost it to foreclosure, either due to a job loss, divorce or your mortgage rate adjusting upwards.

Now is the time to buy!  After all, you keep hearing in the news about how BAD things are for sellers, and prices are the lowest they’ve been in years. This is true and it is to your advantage.  For most of us, home ownership is our single, biggest source of wealth.  It not only puts a roof over our heads that we can call our own, but it also builds security for our futures by paying down the mortgage and building up equity. For most people, their home is their single greatest asset.

Probably the first thing you did was to start looking on the Internet or checking the local newspaper for homes for sale.  After that, you called a Realtor® and he told you that he would love to help you, but you needed to get approved for a mortgage first. Ugh…you know you don’t have the best of credit and you are not sure if you should even call a mortgage lender.

You decide to make the call to a mortgage lender.  You know what the outcome will most likely be in advance, because of your financial situation, but you do it anyway. After gathering tons of information from you all the way down to how many times a week you floss, he finally tells you that based on your current credit, income, down payment, inadequate amount of time spent brushing after meals, etc. you aren’t currently qualified to get a mortgage. Well, duh! You could have told him that in the first place.  Do not despair.

Rent to Buy is now available.  Rent to Buy is your hands-on, step by step, 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!