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Month: November 2014

Lease Option Coaching

Posted on by Wendy Patton

As a lease option coach, the number one question I get is what is the best way to get started in real estate investing. Since I focus much of my real estate career on being a lease option coach, it should be clear that is the way I think you should go. However, there are several ways to go about lease options that I introduce you to in this blog.

Wholesale Lease Options

You won’t find many people in the business of wholesale lease options. That’s good for you. The reason there are few people in this business is because it is a bit off the wall and they simply have not thought of it. But it is a great way to make some quick money with zero risk and zero of your own money in the deal. Here is step-by-step how you go about it.

  1. Find a motivated seller willing to sell on a lease option.
  2. Place the property under contract with you as the person holding the wholesale lease option. You want the contract to stipulate you are only obligated to exercise the wholesale lease option after you find a qualified buyer other than yourself.
  3. Find a buyer capable of paying the option fee and looking to find a qualify end buyer looking for a lease option.
  4. Draw up a lease option agreement with the buyer.
  5. Assign the lease option back to the seller.
  6. Collect the option fee as your payment for putting the deal together.
  7. You are now free to move on to the next deal with $5,000 in your pocket.

Sandwich Lease Options

The sandwich lease option is a great way to control a property with very little of your own money in the deal. The sandwich lease involves you, as the investor, paying only a small amount to bring the home under contract. You don’t purchase the home nor do you take a full lease on it until you have a passive money making deal in place. The sandwich lease is perfect for controlling properties without needing to do much work.

Run an ad on craigslist to find a seller willing to do a lease option purchase. Work with the seller to put together a sandwich lease where you bring in a qualified buyer. The contract should specify that you’re under no obligation in the sandwich lease until you have a buyer under contract.
You then write a sandwich lease with a buyer for more than the value of the contract you have with the seller. Let’s say the sandwich lease option fee you have with the seller is $2,000. You charge the buyer $5,000 to immediately pocket the difference. You then charge the buyer a higher rent than you owe the seller under your sandwich lease deal. Say your sandwich lease with the seller requires a $1,000 monthly rent until the purchase is executed. You then charge the buyer $1,200 a month to collect a monthly passive income of $200 until the purchase goes through. In the sandwich lease, you also collect a higher selling price than you are under contract for with the seller. Three profit streams!

Investing with Lease Options is Safer

At the highest level, there are two ways of investing in real estate. I’ll call them hard investing and soft investing. Lease options on real estate is a soft investing strategy because it doesn’t involve outright owning the property. Hard investing involves taking title to the property.

The bottom line is that for both new and experienced investors, lease options on real estate remain the lowest risk investment method delivering reasonable profits. Should lease options on real estate deals go south on you, you’re only out a few hundred dollars when you walk away from a deal. When you take title to a property, you’re going to have tens of thousands invested in the down payment alone and it’s 100% your responsibility to maintain and sell the property. Lease options on real estate give you peace of mind that you can walk away at any time if the deal just isn’t going to work out.

If you want to work directly with me as your lease option coach or any of my other investing models that have proven highly profitable, please join me at www.wendypatton.com/what-is-wendy-pattons-inner-circle.

Besides reading this article about lease options, you’ll want to read this other useful information that I offer free. Please take advantage of it today.

Real Estate Investment

Rent to Own Houses – A Buyer’s Guide

Investment Property Financing Options

Rent to Own is the Way to Go

House Flipping is Steady and Growing

Lease to Own Homes

Buying a House – The Time is Now

Several times each week, I make the most current real estate investing information available to readers. This time, it’s about lease option coaching but the information I provide changes constantly to stay current with the market. Be sure to check back at: www.wendypatton.com. Also, get started learning how to do NO CASH lease options on real estate by picking up a copy of my bestseller book: Investing in Real Estate with Lease Options and Subject-to Deals.

By Wendy Patton

What did you think of this article? Please leave a comment below.

For more exclusive content, please subscribe to my RSS Feed and YouTube Channel.

Real Estate Investment

Posted on by Wendy Patton

When you start thinking about making a real estate investment, you need to take time to think about the risks that you will be taking. The risk and pay-off between speculating on development of a subdivision or becoming a first time landlord are enormous. Either also requires significantly different levels of capitalization. Your goal needs to be minimizing risk while maximizing profit or cash flow.

Real Estate Investment Cash-On-Cash Return

When it comes to a real estate investment, many investors want to leverage their money. Borrow to use other people’s money to make a profit from it. Still, you need to invest some of your own money. That’s the cash that’s counted when you calculate a cash-on-cash return for your real estate investment.  lease_option_book_cover_large

When you buy a $40,000 house, put in $4,000 of your own money, and take a loan for the balance, you need to calculate how much you are earning on your own money after subtracting what it costs for the money you borrow.

The amount of interest you pay on the loan will become lower each month as you pay down the loan. However, a $36,000 loan at 5% will cost you $1,973 in interest the first year. If you rent the house for $500 per month, you’ll have $6,000 in cash flow. Of course, there are other costs of ownership. The two required costs are property taxes and insurance. Let’s assume the property tax is $550 and the insurance is $625. The cash-on-cash equation goes like this – $6,000 (income) – $1973 (interest) – $550 (property tax) – $625 (insurance) = $2,852.

The $2,852 is your profit on your $4,000 investment. Your annual cash-on-cash return is 71.3%. That’s the power of leveraging your real estate investment.

Managing Your Real Estate Investment

Once you realize how much you can earn by leveraging your real estate investment, it becomes time to consider how much time and work you’ll need to put into managing your real estate investment. Almost certainly, you’ll do the bookkeeping for your first real estate investment. Probably less than an hour of work each month. But that’s for a low risk rental house that you easily place a quality tenant in and he or she stays for several years.

Consider some other more risky real estate investments such as a vacation home, college student rental, or a low income rental with a high turnover rate. These high risk real estate investments will take much more of your time and work.

The work includes cleaning and repairs after every vacation family leaves, at the end of every college year, and when any tenant moves out. After cleaning and repairs, you have to advertise and show it to the next perspective tenant.

Finding the right real estate investment is about much more than only finding a good deal with great cash flow. You also want to find an easy to manage property that doesn’t take too much of your time.

If you want to work directly with me on finding the right real estate investment for you or any of my other investing models that have proven highly profitable, please join me at www.wendypatton.com/what-is-wendy-pattons-inner-circle.

Besides reading this article about real estate investment basics, you’ll want to read this other useful information that I offer free. Please take advantage of it today.

Rent to Own Houses – A Buyer’s Guide

Investment Property Financing Options

Rent to Own is the Way to Go

House Flipping is Steady and Growing

Lease to Own Homes

Buying a House – The Time is Now

Rent to Own Homes

Several times each week, I make the most current real estate investing information available to readers. This time, it’s about real estate investment basics but the information I provide changes constantly to stay current with the market. Be sure to check back at: www.wendypatton.com. Also, get started learning how to do NO CASH lease options on real estate by picking up a copy of my bestseller book: Investing in Real Estate with Lease Options and Subject-to Deals.

By Wendy Patton

What did you think of this article? Please leave a comment below.

For more exclusive content, please subscribe to my RSS Feed and YouTube Channel.

Rent to Own Houses – A Buyer’s Guide

Posted on by Wendy Patton

Inexperienced tenants moving up to rent to own houses can make major mistakes when entering into rent to own houses contracts if they don’t do their homework. Some landlords or sellers will take advantage of these mistakes when the buyer doesn’t know better. This article points out some of the mistakes buyers want to avoid when entering a contract for rent to own houses.

Rent to Own Houses – The Basics

Rent to own houses involve two contracts. One is a standard lease contract with a mutually agreed to rent. The second contract is the option contract giving the tenant the right (but not a requirement) to purchase the house within an agreed upon time (typically, one to three years). Usually, a nonrefundable fee is paid to the seller for the option to purchase. Rent-to-Own-EBook-Cover_medthumb

There are several reasons why tenants want to rent to own houses. First, purchase options appeal to people that don’t have enough savings for a down payment. The renter can negotiate with the seller to have rent credits apply towards the down payment.  Additionally, the tenant has the opportunity to save more money towards the down payment during the rental period. Another third common reason people like rent to own houses is because it gives them an opportunity to improve a damaged credit score during the rental period. Fourth, it gives tenants the opportunity to become thoroughly familiar with the neighborhood before making the commitment to buy.

Rent to Own Houses – Treat These as a Purchase

One big mistake I see tenants make with rent to own houses is they treat them like a traditional lease instead if as a home purchase. When you enter into a purchase option, you should be planning to make the purchase in the end. Don’t just spend ten minutes reading through the standard lease agreement and then sign it. Perform the due diligence you would if you were purchasing the house today. Have a professional inspection done. Visit the neighborhood several times at different times of the day and week. If you have kids, check out the school system. If you use public transportation, check the local routes. Check out any neighborhood amenities that you use regularly such as gyms and parks.

If this is your first rent to own houses agreement you probably don’t know how long it will take you to save the down payment. Talk to a mortgage broker before signing the rent to own houses agreement. If you need to, you can leverage what the mortgage broker tells you into a longer option period. Same thing with your credit score. The mortgage broker should be able to tell you the exact steps you need to take and how long it will take. Or maybe you also talk to a credit counselor.

Fully understand the terms of the purchase option. How much is the option fee (about 1% of the purchase price)? Is it refundable (usually no)? Does the option fee apply towards the down payment (very negotiable)? Where some landlords become greedy here is by not applying the option fee towards the down payment and then adding a security deposit to the lease agreement. In my opinion, the option fee acts as a security deposit and should be applied towards the down payment.

Everything in rent to own houses contracts is negotiable. Make sure any contract you signed is fair to both you as the buyer and the seller.

If you want to work directly with me on the rent to own houses business model or any of the investing models that have proven highly profitable, please join me at www.wendypatton.com/what-is-wendy-pattons-inner-circle.

Besides reading this article about rent to own houses, you’ll want to read this other useful information that I offer free. Please take advantage of it today.

Investment Property Financing Options

Rent to Own is the Way to Go

House Flipping is Steady and Growing

Lease to Own Homes

Buying a House – The Time is Now

Rent to Own Homes

HUD Homes for Sale – Flipping Investors

Several times each week, I make the most current real estate investing information available to readers. This time, it’s about rent to own houses but the information I provide changes constantly to stay current with the market. Be sure to check back at: www.wendypatton.com. Also, get started learning how to do NO CASH lease options on real estate by picking up a copy of my bestseller book: Investing in Real Estate with Lease Options and Subject-to Deals.

By Wendy Patton

What did you think of this article? Please leave a comment below.

For more exclusive content, please subscribe to my RSS Feed and YouTube Channel.

WendyPatton.

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