A lease with an option to buy involves leasing a home from a seller who might not be able to sell it or rent it otherwise. It allows the investor to rent it and then buy it, without having to use money or credit. I was able to do this over and over again. I have bought and sold over 600 lease option (rent to own) homes. The technique of lease with option to buy is what helped me get going “full steam ahead” in the real estate business.
Investing using the subject to technique involves having the seller sign the deed of their home over to the buyer “subject to” the existing mortgage. The seller keeps the mortgage in their name, but the buyer/investor owns the home and is responsible for the payments of the mortgage. The investor does not have to qualify for a new mortgage using this method. The technique of subject to allows the seller to move on and get out from underneath their payments and the investor the ability to buy many homes without using his or her own cash or credit.
Both methods, when done properly, should result in a win/win situation for the buyer and seller. I only teach my students how to use these two methods in a fair and ethical manner. When all parties are treated fairly everyone wins and things work out for the best. I truly believe this is the only way to invest in real estate!
View this post from the original source here:
http://www.wendypatton.com/blog/investing-using-lease-option-or-subject-to-techniqes
Wednesday, December 30, 2009
Monday, December 28, 2009
How to Determine Your Bottom Line
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.
To learn more about determining your bottom line take a look at my book Investing in Real Estate with Lease Options and Subject-to Deals.
View this post from it's original source:
http://www.wendypatton.com/blog/how-to-determine-your-bottom-line
To learn more about determining your bottom line take a look at my book Investing in Real Estate with Lease Options and Subject-to Deals.
View this post from it's original source:
http://www.wendypatton.com/blog/how-to-determine-your-bottom-line
Wednesday, December 23, 2009
Top 3 Reasons You Should Invest in Hands Off Cash Flow Opportunities
Soft markets are GOOD rental markets to invest in. In fact, I invest in soft markets all the time. With the current state of the economy many areas in the U.S.
Here is what Donald Trump has to say about investing in down markets: “You can make more money in down markets than you can in up markets.” Investor Warren Buffet says: “Be fearful when others are greedy and greedy when others are fearful.
- ALL the work is done for you! All you do is sit back and collect the checks! This means you have nothing to do but collect IMMEDIATE monthly Cash Flow.
- Cash Flow – The numbers are analyzed for you. One of the things I teach my students is that purchases should be based on the numbers, not emotion. Your price is based on current monthly rent. Look for properties that create monthly positive cash flow for you from day one.
- Upside Potential- When the market turns around, you will have even more equity in the home. Equity is what builds wealth and adds to your bottom line net worth.
View this post at its original source:
http://www.wendypatton.com/blog/top-3-reasons-you-should-invest-in-hands-off-cash-flow-opportunities
Monday, December 21, 2009
What’s the difference between Cooperative Lease Option and Sandwich Lease Option?
Sandwich Lease Option
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):
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.
http://www.wendypatton.com/blog/what-is-the-difference-between-a-cooperative-lease-option-a-wholesale-lease-option-and-a-sandwich-lease-option
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
Cooperative Lease Options
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.
View this post from it's original source: http://www.wendypatton.com/blog/what-is-the-difference-between-a-cooperative-lease-option-a-wholesale-lease-option-and-a-sandwich-lease-option
Thursday, December 17, 2009
Build Rapport and Make a Deal!
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 Buy to learn more about negotiating the deal and other steps to buying on Lease Options and Subject Tos.
View this post from its original source here: http://www.wendypatton.com/blog/build-rapport-and-make-a-deal
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 Buy to learn more about negotiating the deal and other steps to buying on Lease Options and Subject Tos.
View this post from its original source here: http://www.wendypatton.com/blog/build-rapport-and-make-a-deal
Monday, December 14, 2009
Negotiation Tip: Name your Location
Here's another negotiation tip from Rent-to-Buy:
Whenever possible, you want to be the one selecting the location for your negotiations. 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.
For instance, if you are making an offer to the sellers and are staring out the window at that swimming pool you fell in love with, how strong do you think you’ll negotiate? The answer is: not very. You’ll do whatever it takes to get the home because your emotions are controlling your negotiations.
You might be better off meeting with the seller on neutral ground to make your offer. This will help you keep your mind focused on buying the rent-to-own home without being so emotionally attached to it.
If you are working with a real estate agent, you won’t be meeting with the seller in person to make your offer. Your offer will be submitted through the agent. This way you don’t have to worry about the location of negotiation.
View this post in its original source at:
http://www.wendypatton.com/blog/negotiation-tip-name-your-location
Whenever possible, you want to be the one selecting the location for your negotiations. 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.
For instance, if you are making an offer to the sellers and are staring out the window at that swimming pool you fell in love with, how strong do you think you’ll negotiate? The answer is: not very. You’ll do whatever it takes to get the home because your emotions are controlling your negotiations.
You might be better off meeting with the seller on neutral ground to make your offer. This will help you keep your mind focused on buying the rent-to-own home without being so emotionally attached to it.
If you are working with a real estate agent, you won’t be meeting with the seller in person to make your offer. Your offer will be submitted through the agent. This way you don’t have to worry about the location of negotiation.
View this post in its original source at:
http://www.wendypatton.com/blog/negotiation-tip-name-your-location
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