BASICS |
| What is a lease/option (aka rent to own)? Buyer/tenants pay extra money for the right to purchase a home at the end of a lease. During the lease period, they will be fixing their credit and lining up financing. <Return to Top> |
| What is the primary benefit to me? You CAN make more money and get a better tenant. Generally, folks who put a lot of money down don't want to lose their investment and will more likely take care of the home and pay on time. |
| What is the drawback to a lease/option? You COULD lose money if real estate continues to fall. In some cases, if the assignee exercises their option and the contract is for appraised value, you could lose money if the appraisal is less than what you purchased the property for. There is no guaranteed way to make money in real estate. |
| Is there a guaranteed method for making money? NO. There are no such things as guaranteed way to make money in real estate. Smart investors buy low and sell high. Now is the absolute worst time to sell a property. People who are losing their shirts are folks who recently purchased a property and tried to flip it. They watched 5 episodes of "Flip This House" or listened to some relative who told them that buying property in Vegas was a no brainer. IF you can hang on until the market turns, you will come up smelling like roses. |
| When will the prices of real estate go back up? No idea. What I do know is that real estate goes up over time. I buy properties and patiently wait until prices go up. |
What are my alternatives? There are no magic pills to make real estate head aches go away. Click here for latest information on foreclsures & short sales.
Walk Away |
Mail the bank your keys. Take a massive credit hit and get back into investing in real estate 7 years from now. Get back to me then and I'll help you make good decisions. |
Sell |
Lose money now and get it over with. Properties are sitting for several months at reduced prices before they move. You may as well avoid 8 mortgage payments and lose your shirt now. |
Rent |
No picnic either. Unless you live locally or know of a good property manager, you will be taken for the ride of your life. I don't know of a good property manager. Best of luck. |
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| How much more money can I make? Usually 1% of the current estimated value plus $300-$500 over market rent. You can click here to sample numbers. Overall, you make more money with lease/options than you do with renting. I know this from personal experience. |
| What do you get out of this? Half the option fee. No matter what you decide the option fee is, my assignment will be half. |
| Can I still rent or sell my property? Yes. I am a marketing service and don't have an exclusive contract with you. However, most property management companies and real estate agents have exclusive contracts which means you will have to compensate them if I assign your contract. Be careful. If you have an agent, they will need to contact me BEFORE I market your property. |
| Are there any hidden fees? No. I only make money if I assign your contract. |
| Why is your system so effective? I am the marketing guerilla of lease/options. I have been doing this for years and I've got the marketing down to a science. I also network with people in my industry. This means, I'm not the only one trying to move your property. |
| Can I decide who the contract is assigned to? No. This is non-negotiable. All my advertising includes "NO BACKGROUND CHECKS NO QUESTIONS." The reason why I move so many properties is because of my effective advertising. |
| Is today's value important in lease/options? No. Today's value has nothing to do with a lease/option contract. |
| Can I review your contracts? PLEASE !!! Download Here Every month some newbie investor wastes my time because they really didn't read this page or my contracts. You could save yourself 2 mortgage payments if you read it now. |
| Can I stop using your services at anytime? Yes. I don't take it personally. If you find a renter, decide to sell the property or give it to your sister, I just don't care. What tweaks me are people who have it rented for 2 weeks and didn't have the courtesy to tell me. A phone call or email is all it takes. |
| Could I plead and beg you to rent my property? No. I'm done fixing toilets and chasing rent. It's not my thing anymore. |
| Do you know a good property manager? No. I got into this business because I haven't met a property management company that knows how to return a phone call or email. |
| Are your personal properties lease/optioned? Yes. This is my largest source of passive income. I walk the talk. I will continue to lease/option my properties because it's effective method for moving properties. |
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ADVANCED |
What will the price be at the end of the lease? Contracts come in 2 "flavors" - appraised value or set value.
Appraised Value |
Set Value |
| The property will be appraised by a licensed appraiser agreed by both parties at the end of the lease. Typically it is someone chosen at random on this Nevada appraiser's web site. If the property is appraised at more than what you purchased the home for, you will make money. If the property is appraised at less than you purchased it for, you will lose money. Most contracts come in this flavor because it's fair. |
A set value is agreed by both parties before the lease. Regardless of what the property is appraised at, this will be the purchase price. Rarely do contracts come in this flavor as most assignees aren't willing to purchase a property at much higher than today's value. |
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| Can the "flavor" be pre-determined? Yes. But your chances of the property moving will drop in half. If you have a ridiculous set price that you want to stick to, your property will remain vacant. Buyer/tenants have bad credit but they aren't stupid. |
| What are the numbers like? Click here to see a number break out of a typical property. |
| Do you network with competitors & realtors? Yes. Vigorously. This is all I do and it's my reputation. |
| Can I do a background check on the assignee?No. All my advertising includes "NO BACKGROUND CHECKS NO QUESTIONS." After a deal is done, you are welcome to hear their country & western song. |
Why are no background checks performed? They are not effective in lease/options. Here the 5 reasons why background checks and credit checks are not effective in the lease/option market.
1 |
Anyone interested in doing a lease/option has bad credit. If they had good credit, they would just go out and purchase a house and avoid lease/options entirely. People with good credit don't call me. I never bring anyone with good credit to the table. |
2 |
I have a huge crowd of people eyeballing my properties because I don't ask questions. If I asked a lot of questions, I couldn't bring you anyone. |
3 |
Folks who put down 2% and pay $300-$500 over market rent generally don't want to lose their investment. They will eventually own the home and they usually take care of the home they will be buying. |
4 |
80% of the lease/option candidates are moving from out of state and have no background to check OR they went through some medical/family tragedy that turned their world upside down. Experience has taught me that these country & western songs are a huge waste of time. You are welcome to listen to it after they have moved in. |
5 |
Having managed properties for over 18 years, I have learned that money talks and background checks are often useless. I don't ask questions on my own personal properties and have had much better success with lease/options than renting. |
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| Will there be pets in my house? Probably. My advertising has "Pets Allowed." The only exceptions will be properties that have HOAs that exclude types or sizes. Pit Bulls will not be allowed in your home. IF you have problems with pets, you are not really serious about a lease with the option to buy. |
| Can the assignee be evicted? Yes. I evict people every month for non-payment. I don't mess around and show no mercy. |
| What are the success rates of options? Less than 20%of buyer/tenants exercise their option to purchase. 50% give up and move back to where they came from. 30% either extend the contract or negotiate alternative ways to purchase a home. |
| Why is the success rate so low? Most assignees don't have the discipline to succeed. It takes effort to clean up credit and keep a consistent income. |
| Do you honestly help assignees? Yes. I help them with cleaning up their credit and hook them up with the most experienced mortgage brokers I know. I even check in on them from time to time to give them words of encouragement and offer free advice on personal financial matters. I sincerely want them to own a home and do what I can to help. These people are my customers for life. |
| How fast can my property move? Your property will move in about 8 weeks "at market price". UNLESS it's between November 15 and January 15. Nothing moves then. Everyone has turkey, booze and Santa on the brain. You can't even give your property away during that time. |
| What is market price in the lease/option game? About 1.5% down and $300 more than market rent. This is obviously a generic answer to most properties. If your property is extra clean, extra dirty or has some unique feature, this will vary. |
| Who determines current estimated value? I do. |
| Is the current estimated value important? No. Remember, contracts come in 2 flavors - appraised or set price. The set price is negotiated and is rarely the current estimated value. |
| Why is the estimated value posted on the web?It used only for a frame of reference. People need a ball park figure of relative value. IT IS NOT WHAT THEY WILL PURCHASE THE HOME AT. It is also used to provide ball park numbers for a mortgage. I try to educate people what their mortgage will be BEFORE they move in. |
| How does the current estimated value relate to the purchase?It doesn't. Don't dwell on that number as it doesn't relate to lease/options. |
| Can I elect not to sell if the option is exercised? No. After contracts are signed, money exchanges hands, and the assignee completes the contract by paying on time, it will be your turn to complete the contract. If you breach a contract, I will assist my assignees in a lawsuit against you. You will end up losing serious money if you attempt this. |
| Can I determine the option fee & monthly?Yes - you can log in 24x7 and change the numbers. |
| Should I keep an existing tenant?Yes. The market is really bad. You make more money by keeping your tenant. |
| Can you evict my existing awful tenant? No. You will have to clean up your mess before I can start helping you. |
| How can I improve my odds of making money? Read my common mistakes and tips pages. |
| Are you a licensed realtor? Yes. |
PROCESSES |
| How do I get started? I can meet you or you can mail me a key. If you already have pictures and a lock box on the property, I can get you posted right away. Email me with your address and photos and I will get you started. |
| Is a lock box required to be on the property? Yes. I will not market a property without a key. I don't care if the Dali Lama lives with you, I will not market your property without access. I don't have time to call your sister's husband's uncle at 6am to arrange a meeting. |
| What happens after you take pictures? You approve of what is advertised on the web before the property is marketed. When the property is shown, I will send you an email to keep you posted on activity (or lack of). If someone is interested the assignment, I will call you immediately. |
| Who shows my property? Myself and a couple of people I network with. These are people I trust with my own properties. |
| What if live at the property? A key is still required AND your chances of success drop 30%. You will get a courtesy call when an appointment is made. |
| Can I simultaneously market the property? Yes. Unless you sign an "exclusive" contracts with someone else. I don't care what you do with your property as long as you let me know immediately if it is not available. |
| Do I need to make property improvements? No. Just keep it clean. The biggest mistake most lease/option investors make is putting money into the property. Keep it clean and you're done. If you reallly feel that more is needed, let me take a look at it first before dumping any money in it. |
| What happens when you assign the contract? I call you to confirm our agreement before it's assigned. You will have 24 hours to respond. If you don't respond within 24 hours, you will probably eat your mortgage a few more months. |
| Where do the monthly payments go? Directly to you OR an escrow account. |
| Will you help me if the option is exercised? Yes. The process is very simple and I want to insure the process goes smoothly. I don't charge for this so don't be shy. |
What happens if the option isn't exercised? You have several choices. In any of these scenarios, you keep all option fees & rent credits.
1 |
30% of lease/options are extended because it is in every one's best interest if the assignee isn't qualified to purchase yet. |
2 |
Negotiate different terms. Many of the deals I have negotiated turn into "owner carry" scenarios because the assignee made payments ton time. |
3 |
Revert back to a straight lease. I have negotiated some deals where everyone wants the relationship to change to a straight rent. |
4 |
Evict the tenant and start over. It's an option but never |
5 |
Having managed properties for over 18 years, I have learned that money talks and background checks are often useless. I don't ask questions on my own personal properties and have had much better success with lease/options than renting. |
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| Are you flexible on your processes? No. It has taken me years to develop methods for doing lease/options efficiently. This is the McDonalds of lease/options. Clean - efficient - results. |
| How can I make this process painless? Read my common mistakes and tips pages. |
| PROBLEMS |
| What happens if I reject a deal? I will assign a lease/option agreement to someone else. I never force you into a deal you don't want. |
| What happens if I don't return your calls? We're done and my network will know about you too. The worst mistake you can make is ignore me. Yes or No will do fine. If you need time to make decisions, that's ok, just keep me in the loop "I need another day to think about the offer." If I don't hear from you, I move the deal somewhere else. |
| What if I don't have email? It is not likely we can do business. I'm on the phone ALL the time closing deals. I use emails to correspond with people for issues that are important but not urgent. It's not practical to call you every week to confirm availability. |
| What if I check my email only once a month? We are going to have problems. If you don't respond on simply inquiries, it tells me you aren't serious about your investment. I just don't have time for phone tag. If I call you it's because I have a deal on the table. |
| What if repairs are necessary? After 30 days, assignees are responsible for the first $500 in repairs. The best thing about lease/options is that they require very little effort to maintain. |
| Who does repairs during the first 30 days? You do. If an assignee moves in and discovers that the air conditioning doesn't work, you will be on the hook to fix it. This could happen also if the air conditioning has been off over the winter time and it's first turned on in April. If anything is going to break, it's going to be the air conditioning. |
| What if my assignee doesn't pay on time? I will evict them for you. My eviction process is just as clean as my lease/option process. |
| What if the market continues to fall? You could lose money if an "appraised value" option is exercised and the property is appraised at less than what you purchased the property for. |
| What if I refuse to sell my property? If an assignee performs their part of the contract, a lien will be placed on the property. You will end up losing serious money if you attempt this. |
| Will this process save me from foreclosure? No. If you are behind in payments are on the brink of going under, do not contact me as I can't help you. You will make matters substantially worse for yourself if you try to do a lease/option. |
| Is there a way to cheat my assignee? Not with me around. I know all the tricks. If you try to pull a stunt on my assignee, you will lose more than just your property. Honor your part of the contract and everyone will do just fine. |
| What usually happens to partners who don't read your common mistakes and tips? They learn from mistakes the hard way. Every month, I see some newbie investor lose 2 mortgage payments because they didn't read my common mistakes. Tragic and unnecessary. |
