Qualifying A Good Buyer

When qualifying a good buyer for a lease option you are looking for someone that had a blip in their credit and now they are on their way to financial stability. When you look at someone’s credit, see if they are on their way up or not. You can see what they have paid recently and what is still behind. This will show up on their credit report. Learn to read credit reports and get set up on a system that works for you. If you don’t know which system to use, talk to others in your real estate investors group. They will know which companies provide which services in your area. You can also work with a mortgage broker to run credit and do the lease option approvals.

Once you have approved a tenant for your lease option home; all you have to do is draft the paperwork and have them sign it all. You need not give more than 12-18 months to the buyer on an option. This timeframe is most often enough for a good option tenant to get a mortgage. If at the end of the time period they just need a few more months or they want to extend, it is your option to decide if that is what you want to do. This is when you can also renegotiate. Maybe the homes in that area appreciated more than you expected, then you would want to extend, but increase the purchase price somewhat. You could also ask for another $500-3000 option fee, to extend the option. You can also raise the rent slightly. There are times I have given my tenants an extension for free, because of circumstances.

For more information on How to Qualify a Buyer you can check out my book Investing in Real Estate with Lease Options and Subject-to Deals.