Selling on a Lease Option - Why?

If you’ve been trying to sell a home in a down real estate market you are probably having a hard time finding buyers and are looking for some options. You might be thinking about rent to own. But you might also be wondering what do I get out of selling on a lease option?

Here are some benefits to rent to own versus just renting out your home or waiting forever for a conventional buyer:

1. Higher Purchase Price - rent to own sales typically command a price premium over traditional sales. The buyer is paying extra for the flexibility he receives by not having to do an outright purchase immediately. Plus, let’s face it conventional buyers know what the market is like and they are beating up sellers over the price. When you are selling on a lease option you’ll find that most rent to own buyers accept your asking price without question.

2. Higher Rent - You may be able to charge more for monthly rent in a rent to own than you would for just a straight rental.

3. Cash Flow - If your monthly payments are less than the monthly rent, the difference goes in your pocket. That’s a whole lot better than paying a mortgage, utilities and maintenance costs for your home to sit empty while you wait for a conventional buyer to come along.

4. Option Fee - This upfront fee paid to you by your rent to own buyers is what secures the purchase price down the road. If the buyer closes on the home, it would be applied towards the purchase price. If the buyer elects to not purchase the home, the option fee is forfeited and still remains yours. Either way you win. If you were to just rent the home, the tenant would put down a security deposit. the option fee is different than a security deposit. A security deposit is owned by the tenant and can’t be used by the owner, except for repairing demages, unpaid rent and other provisions as mandated under state laws. The option fee is owned by you and it’s yours to keep - big difference.

Whether you are a home seller or an investor doing rent to own investing you’ll find that selling on a lease option has definite advantages for you.

Lease Option Investing - How I got Started

When I first started in real estate I didn’t know anything about lease option investing. My first house was a three-bedroom bungalow in a suburb of Detroit. My principal, interest, taxes and insurance (PITI) was $438. I rented two bedrooms to two girls for $250 each. I had cash flow and I was living free! My $62 cash flow per month paid my credit card payment. I was 21 years old and I thought this was pretty cool! So I decided to do it again. I did it three more times that first year. I had no money or assets, but I did have good credit. I was making all of my down payments with credit cards. This is NOT how I recommend doing little or no money down investing.

At the start of my real estate investing career; I was $20,000 in debt with student loans. In my mind, the worst thing that could have happened was that I would go bankrupt. However, I had good credit and was able to make my down payments on homes with credit cards. It wasn’t long before I had a credit line of over $250,000 - and too many credit cards. Using credit cards should be the last resort for any kind of investing, including lease option investing. Remember, credit cards are not how I recommend doing little or no money down investing. I never missed any payments, even though it was an administrative nightmare. The problem is that they set me many years back in my wealth development.

When I started investing, I didn’t know about lease options and I thought what I did was a no money down investing deal and something very creative. I didn’t know of any gurus at the time who focused on buying on lease options, so I developed my own tools and systems to buy homes with little or no money down. It was a case study of learning the hard way.

Buying on a lease option

When it comes to buying on a lease option you need to find motivated sellers. What makes a motivated seller?

A variety of circumstances and situations in people’s lives can make them need to sell their home. These can include a job transfer, bankruptcy, foreclosure, upgrading to a bigger home, or a number of other reasons. For real estate investors buying on a lease option it is crucial to buy homes from truly motivated sellers - sellers who have an extra urgency, usually financial. You can’t get a good deal from an unmotivated seller who has no pressing reason to negotiate or give in on any part of a transaction.

There are different degrees of motivation and different reasons people need to sell their homes, but overall there are two basic categories of motivated sellers:

1. Desperate and distressed (bad debt) - someone in trouble financially, behind on on payments, going in a bad direction, lost their job, foreclosure, etc.

2. Not desperate or distressed (good debt) - someone not in trouble financially, not behind on payments but motivated for other reasons: two house payments, inherited a home, burned-out landlord, job transfer and so on.

When it comes to bad debt you want to consider subject to investing, these types of motivated sellers are good fits for subject to investing. However, when you are buying on a lease option you want to focus on the sellers with good debt.

Subject To Advantages

Here are some of the advantages to subject to investing

1. Little to no money down investing. Usually you only need to pay the seller a small amount to sign the deed over to you. It’s even possible that, if they owe more than you are willing to pay, they may pay you to take the deed from them.

2. No financing required. When you do a subject-to, you don’t need to get a mortgage because you are taking over the seller’s mortgage payments.

3. Ownership. the day the seller deeds the property to you it is yours.

4. No qualifying. If you buy a home traditionally, you have to go to a bank or mortgage company and qualify for a loan.

5. No income or credit checks. Not once has a seller ever asked to look at my income or check my credit. They are more worried about their situation and how to get help from you.

6. You can buy them with your IRA. If you use your IRA for the option payment, the rental income and any other income goes back into the IRA.

7. Great return on your investment (ROI). Little to no money down investing yields a high rate of return.

8. The seller will love you. You will be making a positive difference in someone’s life.

Want to learn more about subject to investing? Take a look at my website. Here is a free article on subject to investing.

Lease Option Investing - Finding the Right Realtor

When doing lease option investing it’s important to find the right real estate agents to work with to get your lease option deals.

Realtors have a relationship with their seller that is very unique. Sellers tell their Realtors almost everything about their personal lives. Realtors therefore know who is motivated and why. They know who is getting divorced, if they are in trouble financially, if their builder is almost done with their new home, if they have custody issues, if they are getting worried about double house payments, and on and on. A lot of real estate agents probably want to say, “Too much information!” but they don’t. They stay as interested as possible in order to build rapport.

Because the Realtor is providing a very necessary service to the homeowner in helping them sell their house, and because the homeowner so freely tells the agent everything, the homeowner is not shy about calling the Realtor and saying the four-letter word after the home has been sitting on the market awhile: “Realtor, if you don’t sell my home soon, I am going to have to rent it!” This word makes a Realtor cringe. If the home doesn’t sell soon, the Realtor won’t get any commission.

As a lease option investor these are the types of agents you are looking for. The ones who have heard real estate’s dirty four letter word - rent. Network with real estate agents to find if they have any sellers who have talked about having to rent their home. These are the kinds of sellers that make good lease option candidates.

Lease Options - Build Rapport with a seller

If you were trying to sell your house, either conventionally or as a lease option, who would you give a better price to? The buyer who came in saying, “I don’t like your carpet color. Are you going to replace it? The walls won’t match my furniture. This kitchen is just not my style?” or the buyer who said, “I like the layout. I see there’s a ding in the wall. You don’t mind if I fix that, do you? I just want to make this my home. I love it.”

You would choose the second person, of course, because they are reasonable and are trying to work with you. You would instinctively want to work with them.

In lease options, rent to owns, and even subject to investing building rapport with the seller is key to making a deal. If the seller doesn’t like you, the deal will probably never happen. Therefore, if meeting people and being reasonably conversational and interested in the seller’s home isn’t your strength, take someone with you who is warm and friendly and can bridge that gap for you. The reason this is so important is because, for either a lease option or subject to investments you are asking someone to give you control of their house with little or no money down. They must feel comfortable with you.

Rental Markets are Back!

The high rate of foreclosures and the tightening of mortgage lending has brought rental markets back on strong. This means that lease option and rent to own investors are having a field day right now. It’s a one-two punch combination where many good people are losing their homes and then they can’t qualify for mortgages right away. Plus many other would be buyers also can’t qualify.

This makes them perfect candidates for lease options. they can get into a home they want without it just being a rental and then buy once their credit is in shape.

Take a look at this article on rental markets coming back.

Real Estate Timing - Knowing When to Buy and When to Sell

At its heart, real estate investing is quite simple, you want to buy when prices are cheap and hold until prices are high and then cash out. You can make a whole lot of money with this very simple premise. The trick of course is in knowing When to Buy and When to Sell. That is what real estate timing is all about.

There are a lot of people say that there is no way to know when a market is near its bottom and poised to go back up and there is no way to know when a market is near its peak and ready to go down. Most people just listen to the mass media and if they see that everyone else is buying they buy too and if everyone else is selling then they sell. The problem with this approach is that the mass media and everyone else doesn’t know when you should be buying and selling! You see most people follow the herd mentality, they act once they see everyone else acting. The mass media really does nothing more than report on everyone’s actions. If everyone is buying than the mass media talks about how great the market is and says you should be buying. Then when a market is crashing and everyone is selling the mass media says you better sell before prices go down more. But is this approach going to make you any money? NO! If you buy when everyone else is buying then you’ve missed all the appreciation. And if you sell when everyone else is selling then you’ll be watching prices drop as you are trying to unload your investment.

That approach just doesn’t work. As real estate investors we need a better solution to real estate timing. We need to know when to buy, just as a market is about to go up so we can capture the most appreciation. We need to know when to sell, before a market reaches its peak, so we can take our profit and get out before the market turns down. There is a way to do just that, it’s called market indicators. If we look at certain real estate market indicators and calculate a market’s momentum we can actually see whether it’s time to buy or sell in any real estate market. Market momentum is an extremely powerful tool in real estate timing.

And it works!

We’ve analyzed over 200 real estate markets and used historical data going back as far as 15 years and when the market momentum says buy we see home values going up shortly after. When the market momentum says sell home values level out or go down. The numbers don’t lie! This is the kind of invaluable tool a real estate investor needs, it tells us when to buy and when to sell and it has been proven based on years of historical data to make money. You can literally make tens of thousands of dollars more per property just by knowing the right time to buy and the right time to sell.

It took years of research to bring this real estate timing data together but it’s available now to real estate investors at an unbelievably affordable price. Follow this link to learn more about real estate timing and how market indicators and market momentum works.

Real estate timing webinar replay available

Last night's real estate timing webinar was incredible! We had some technical difficulties but even with them people were so excited about the topic that they wanted to listen.

We have a replay for the real estate timing webinar available now (video and audio works great!). Just follow the link to see it.

This stuff is really powerful. You'll learn exactly how real estate timing will allow you to know When to Buy and When to Sell and how that can make you a lot of money. This webinar contains real examples of how real estate timing works and you'll see for yourself that the charts show you when to buy and when to sell and how average home prices reflect that timing.

If you want to find out more after the webinar about real estate timing and see what MSAs are available, follow this link for real estate analysis.

Last chance to register for the Real Estate Timing webinar tonight!

If you want to make money in real estate you've got to know the proper timing. When to Buy and When to Sell.

We are going to learn how to do just that in this special real estate timing webinar. This is the kind of information you just can't get anywhere. This information PRECEDES mass media and public awareness. It gives you the opportunity to get in and get out at the right time.

When you know the proper timing of real estate you can make a whole lot more money. It's time to throw out the old methods of buying without knowing what the market is going to do and selling without knowing if it's the right time. That's too much like gambling. And it's not necessary! We're going to learn how to time your purchases and sales in real estate so you don't have to gamble. And it's easy! You won't want to miss this.

Join me TONIGHT - Wednesday, June 17th from 8PM to 9PM EST by simply clicking the link below. Space is limited so please register quickly.

https://www2.gotomeeting.com/register/862814675

Real Estate Timing Response has been Incredible!

Wow! The response so far has been overwhelming. This one of a kind real estate investing timing webinar seems to be what everyone has been waiting for.

How would you like to make an extra $50,000 (or more) on each deal you do? Seems hard to believe doesn’t it? But we are going to learn how to do exactly that simply by using market indicators. It’s easy to learn but the results are so powerful, so dramatic that they will affect how much you can make on each deal by tens of thousands of dollars.

We are going to look at why location doesn’t matter nearly as much as timing when it comes to real estate investing. If you buy at the right time and sell at the right time you are going to make a whole lot more money than if you just buy based on location.

Knowing the proper timing, however, isn’t so easy. The mass media doesn’t know. If you look at the headlines in the past they preach to buy when a real estate market is going crazy – usually just before it’s about to go down and long after all of the gains have been made. Then after it crashes they say you should have sold 12 months ago.

The average real estate agent doesn’t know. They tell you to focus on location, location, location and that there isn’t anything you can do about timing.

But it is possible to time your real estate investing. Join me on this one of a kind webinar event where we are going to look at how to time real estate purchases and sales to make an extra $50,000 (or more) on each deal you do. Sign up now because I want to make sure we have enough phone lines available for everyone.

Join me on Wednesday, June 17 from 8:00pm - 9:00pm EST by simply clicking the link below.

https://www2.gotomeeting.com/register/862814675

Space is limited for this special event so register early!

Real Estate Timing - Knowing When to Buy and When to Sell

Wouldn't it be worth its weight in gold to know when it's safe to buy again?

Most people say that the key to successful real estate investing is location, location, location. But the truth is location doesn't matter nearly as much as timing, timing, timing. If you buy at the right time and sell at the right time you are going to make a whole lot more money than if you just buy based on location.

Knowing the proper timing, however, isn't so easy. The mass media doesn't know. If you look at the headlines in the past they preach to buy when a real estate market is going crazy – usually just before it's about to go down and long after all of the gains have been made. Then after it crashes they say you should have sold 12 months ago.

The average real estate agent doesn't know. They tell you to focus on location, location, location and that there isn't anything you can do about timing.

So how can you properly time your real estate investing? With Market Indicators.

By properly analyzing the right indicators and looking at a Market's Momentum you can buy when a real estate market is down and sell when it's high. That's how you make money in real estate.

Join me on Wednesday, June 17 from 8:00pm - 9:00pm EST for this one of a kind webinar event where we are going to look at how to time real estate purchases and sales to make a whole lot more money on each deal you do.

Simply register by clicking the link below. Space is limited for this special event so register early:

https://www2.gotomeeting.com/register/862814675

Rent to Own - For Home Sellers

If you have been trying to sell your home recently you already know that it is no easy task these days. Where are the buyers? They are out there they just can’t get mortgages right now. So how do you sell your home if buyers can’t get mortgages?

I’m going to introduce you to something called rent to own. Rent to own is a way for home sellers to sell their home to a buyer who can’t currently qualify for a mortgage. You are renting your home to the buyer for a period while they work to qualify for a mortgage and then they can buy it. How does rent to own work? You and the buyer agree to an option - this gives the buyer the right to purchase your home during a set period of time. While this option is valid the buyer rents the home from you. By the end of the option the buyer must either purchase the home or you get to keep their option fee. While this option is valid you cannot sell your home to anyone else.

Why would you do a rent to own?

There are a number of advantages to you.

First, it gives you the ability to sell your home when you might not otherwise find a buyer. If you’ve been thinking about just renting your home to cover the mortgage payment, rent to own is a better choice for you.
Second, when there are a lot of other homes on the market that you are competing against, this gives you the ability to offer something they don’t. You need an edge against your competition and rent to own can do it.
Third, you can sell your home a whole lot faster. Instead of having your home just sit on the market you’ll attract a lot more buyers with this creative choice. Plus once you find a buyer you can get them into the home much faster (typically in a week or so) versus the 45 days or more it takes for a conventional buyer to close.
Fourth, you might be able to get a higher purchase price. Let’s face it, regular buyers are negotiating hard these days. They know what the market is like and they are beating up home sellers on the price. Rent to own buyers are different. They know they can’t get a mortgage right now so they negotiate a whole lot less. Many times they don’t negotiate on price at all! How nice would it be to get your full asking price in this real estate market?

Intrigued yet? I hope so, rent to own can be a great option for you. If you want to learn more take a look at my book, Rent to Sell. It is a step by step guide for home sellers to give you rent to own training. It will tell you how to market your home as a rent to own, how to find and screen buyers, how to handle the paperwork and so on - from start to finish.

Becoming a real estate agent

If you are a real estate investor and are thinking about becoming a real estate agent or becoming a Realtor, I strongly recommend it. There are tons of great advantages for real estate investors, whether you do lease option investing or other types of real estate investing. In my article on becoming a Realtor I go into some of the advantages and why I think it is so beneficial for real estate investors to have their real estate license.

I’m going to focus on one of the key advantages of becoming a real estate agent here for lease option investing. One of the biggest advantages in my opinion is the creditibility you get with other real estate agents. If you want real estate agents to bring you lease option deals time and time again the best way to get through to them is to be an agent yourself. It gives you instant credibility, especially if you are an agent with a well-known office. Other agents will be much more likely to trust you and send you those lease option deals if you are a real estate agent yourself. Sometimes being a real estate investor has a certain stigma attached to it in the eyes of some real estate agents, they don’t necessarily trust us or like us, so you have to overcome that opinion to do deals with them. But if you are a real estate agent instead they’ll look at you in an entirely different way.

As I said, it also helps to be an agent with a respected office, but most of us investors don’t want to be in an office where we have to do ‘regular’ real estate agent stuff, like floor time and so on. It pulls us away from our real estate investing focus. If you are thinking about becoming a real estate agent drop me an email at wendy@wendypatton.com and I can refer you to a respected office in your area that is real estate investor friendly.

Selling on a Lease Option

Real estate markets across the country are suffering right now. Sellers can't sell their homes and buyers can't get mortgages. Real estate agents are having a harder time earning a living. Gone are the days of putting a home up for sale and expecting it to sell with minimal effort. It's time to get creative by selling on a lease option!

What is a lease option?
Lease options are a way to buy and sell homes without an immediate conventional mortgage. It gives your buyers who can't qualify for a mortgage right now the opportunity to get into a home right away while they improve their credit and build up a down payment while living in the home. It gives the seller the ability to beat their competition, which there is a whole lot of these days. Sellers can reach a far greater pool of potential buyers. They will likely be able to sell their home quicker and for a better price. For some sellers it may be the ONLY way they can sell their home in this real estate market.

How does selling on a lease option work?
A lease option works like this: The buyer and seller agree to an option which gives the buyer the right to purchase the home during a set period of time. During this option period the buyer leases the home from the seller. By the end of the option the buyer must either purchase the home or forfeit their option fee. While the option is valid the seller may not sell their home to anyone else.

Advantages for the Seller
Here are some of the advantages to home sellers when selling on a lease option:
1. Allows them to beat their competition.
2. The seller can collect rent on their home while it would otherwise site vacant
3. The can often receive a higher purchase price
4. The can sell their home in a down market when they otherwise might not have been able to sell at all
5. Allows the seller to actually sell their home instead of just renting it.

Advatanges for the real estate agent
While selling on a lease option isn't as ideal as a conventional sale where you get your entire commission up front it is a whole lot better than:
1. Turning away a potential buyer who can't currently qualify for a mortgage
2. Having your seller just rent their home because it won't sell and you only get a tiny rental commission
3. Losing a listing because the seller blames you for their home not selling.

When selling on a lease option you still get your full commission - part of it upfront out of the tenant-buyer's option fee and the remainder when they purchase the home.

Obviously selling on a lease option is not the first choice for home sellers and real estate agents. Whenever possible we want to sell to conventional buyers. But when that isn't working this is a great alternative. To learn more about selling on a lease option check out my book, Rent-to-Sell, a step by step hands-on guide to selling your home as a rent to own.

Wendy Patton and Pre-Paid Legal

Every now and then it's important to remind people about the huge importance of the benefits of Pre-Paid Legal to real estate investing. I use Pre-Paid Legal all the time. For a very low monthly fee (with no contract required) you get the full line up of their benefits. One of the biggest is unlimited free phone consultations. You can ask an attorney any and every legal question you could possibly have whether it is about real estate investing or something else entirely. think about it, if you have only 1 legal question every 4 months an attorney will bill you about $150 each time you talk with them (and that's assuming it's a quick question), that wold total up to $450 in a year just for those 3 questions. You can have a monthly membership to Pre-Paid Legal for about half that each year.

Finding an attorney when you need legal help is a pain in the behind. There are so many out there and it's always hard to know if you are getting a good one. If you use Pre-Paid Legal when you need legal help you have access to their group of quality attorneys so there is no need to go through the hassle of finding an attorney.

With Pre-Paid Legal you can also have contracts reviewed, get legal representation in court, and have letters written on your behalf. All as part of your very low monthly fee.

Take the time to just look at the benefits of Pre-Paid Legal and I think you'll find they are well worth it.

Subject To Investing - Conquering Fear

When it comes to subject to investing the biggest hurdle I've found that most real estate investors have is overcoming their fear of asking the seller for the deed. In fact, that fear is often so strong that many investors never do subject to investing at all. I teach a lot about lease options and subject to investing and each technique is best used in different situations. Most home sellers that are good subject to investing candidates do not fit the criteria for lease options. If you get a lead from a seller who is in trouble and they don't fit your lease option criteria, what do you do? Do you walk away and say, "sorry I can't help you"? Or do you recognize that this seller might be a good subject to investing candidate and ask them to sign over the deed?

If you want to succeed in subject to investing, or any other kind of real estate investing for that matter, you've got to overcome your fears. Take a look at this video, if I, Wendy Patton, can bungy jump over the Royal Gorge in Colorado with nothing between me and the crushing ground but a few rubber bands surely you can overcome your fear in subject to investing and ask a seller for the deed!

zero down investing with lease options

I hear from a lot of people that you just can't do zero down investing in real estate. Realtors will tell you that you have to have a down payment so you can get a mortgage. Mortgage brokers will tell you the same thing. Even some real estate investors that have had their opinions clouded by naysayers will say that zero down investing deals just aren't out there.

Certainly not all of my deals are zero down investing deals. Sometimes I have lease option deals where I put a small amount of money down or even spend a little in repairs. But I will tell you that without question it is possible to do zero down investing! You have to choose the right strategy however, like lease options.

There are two ways to do zero down investing with lease options. The first is setting up a sandwich lease option with a home seller in which you pay the seller an option fee, but you don't start the lease option until you find a lease option buyer and they pay you their option fee. That way you can pay the seller their option fee from what the buyer paid you and hopefully have some left over. You've just set up a sandwich lease option with no money out of your own pocket.

The second way is to not pay the seller an option fee at all. Many times they won't ask for it or even know to ask for it. Again don't start the lease option with the seller until you find a lease option buyer. That way the option fee you collect from the lease option buyer is yours to keep entirely. That's zero down investing! As a matter of fact, you are actually getting paid money at the beginning so it's even better than zero down investing.

One thing I want to stress because it is Very Important. Even though you are doing zero down investing lease option deals you still absolutely want to have cash reserves! Your reserve funds will carry you through if something goes wrong, like the buyer moves out or even worse you need to evict the buyer. During those times you are still obligated to pay the seller the monthly rent while you find a replacement buyer. Having those cash reserves gives you protection and peace of mind. There is nothing worse than having something go wrong and not have the money to carry you through. I recommend at least 3 months of reserve funds.

No money down investing

If you've heard me speak before you have probably heard of my lease option investing student, Mack Payne. I use one of his rent to own deals as an example when I talk about numbers.

In this clip Mack talks about how he has benefited from my lease options course. He talks about little or no money down investing, creating a win-win-win situation for the buyer, the seller and the investor (and the real estate agent too!) In fact Mack will be closing on one of his lease option deals very soon, to the tune of a $20,000 plus payday! Not only that but it was a zero down investing deal on his part. That's right, no money down.

Wendy Patton inspects a home

In this video clip Wendy Patton shows you things to look for when considering purchasing a house as a real estate investment. She inspects each home herself when deciding to make an offer to purchase it as a lease option or some other type of little or no money down investing. If her offer is accepted she will also have a professional inspection done. This allows her to get an accurate idea of costs.

When doing lease option investing it's important to calculate your numbers at the beginning, this includes any repairs the property might need.