There is not a more creative way of buying real estate with lease options than by working directly with the seller. There is absolutely no reason you can’t work with realtors and I write about that often. But when you work directly with the seller, it becomes a little easier for the two of you to come to a meeting of the minds.
I’m giving away key information today in the form of highlights and tidbits about buying real estate with lease options.
Know How Much You’ll Make on the Deal
Before ever signing any paperwork, a knowledgeable investor always has a very good idea of how much money he/she will make on the deal. That’s where this old real estate adage comes from – “You make your profit when you buy – not when you sell.” In this particular situation, you make your profit buying real estate with lease options directly from the seller.
Not only do you want to know how much you’ll make before signing the paperwork, but this is also the information that empowers you to negotiate the deals that you want to be part of. Smart investors do a little homework upfront to define the profit points before making a firm proposal to the seller. If you don’t follow my blogs regularly, you might want to go back and read these two previous blogs:
Selling Real Estate on Lease Options – By the Dollars
Selling on Lease Options – For Big Profits
Buying Real Estate with Lease Options – Highlights & Tidbits
Knowing most of the financial details upfront is key to structuring the deal from the beginning. That’s exactly what the course materials are all about and here is a glimpse inside:
* Know how much money the seller wants at the beginning of the deal. It may or may not be an amount that you can work with.
* Clearly know what the property is worth in today’s market.
* Using my proven formulas, calculate what you can expect the property to be worth in the future (over the life of the lease option period).
* The expected future value is critical to your profit.
Sandwich lease option investors love making profitability calculations.
These numbers may not be the final profit that you earn but they will give you a good indication before you make a firm offer when buying real estate on lease options directly from the seller. You’ll be locking in your option price with the seller based on the current market value (possibly at a discount). The price you offer to the buyer is based on the anticipated future market value. This is the premium price a buyer pays for the ability to purchase on a lease option. This is where most of your profit comes from.
The premium price to the buyer is very important but it’s not your only profit point. You’ll also get a monthly payday from the rent-price-spread and the lease option fee that the buyer pays upfront. The worksheets help you calculate all of this information before buying real estate with lease options.
Other Considerations Before Signing the Deal
Several considerations go into the amount of time you negotiate for on the lease option with the seller. Market conditions should be one consideration. Regarding the lease period, your number one consideration is that your lease period with the seller be longer than with the buyer.
I give serious thought to the particulars for each deal but typically plan to offer the buyer between 12 and 18 months to complete the deal.
Other than my students and myself, I don’t know of any other lease to own investors who consider the time of year that the buyer’s lease option will expire. I do this because if the deal doesn’t close, I want the house back during the busiest market time of the year – the spring market. Of course, my option period has not expired when the buyer’s time expires, so I still have an opportunity to put a different deal together.
Just like the premium sales price for the buyer, you want to have a good idea of how much you’ll be able to charge for rent. Because this is going to be an active deal for a year or longer, you want to know how much positive cash flow you’ll have each month.
Positive cash flow is an important consideration for how much rent you’ll agree to pay to the seller.
A lot of valuable information is calculated for you in the worksheet before you make an offer to the seller. By the time you finish the worksheet, two important pieces of information will pop-out for you. One is the suggested sale price to the buyer. The other is the suggested monthly rent… and plenty of other useful information to make your negotiations both profitable along with a winning solution for everyone involved.
Your profit numbers become much clearer as soon as the worksheet is completed – before you make an offer when buying real estate with lease options directly from the seller!
Whether selling or buying real estate on lease options, here is where you’ll find the answers to your questions – and answers to questions that you haven’t yet thought to ask:
- Investing In Real Estate with Lease Options.
- Advanced strategies for Buying and Selling with Lease Options.
- Your Wealth Building Arsenal.
- Add Personalized Coaching.
- Cooperative Lease Options.
- Expand to Get the Deed “Subject To.”
- Round it all out by Working with Realtors.
By Wendy Patton
For more than 30 years, I’ve used the Sandwich Lease Option System to earn myself and my students millions of dollars. From my experience, I know there is plenty of room and opportunity in the real estate investment market for everyone wanting to participate to find profitable deals. It’s because of that fact and my personal success that I share the Sandwich Lease Option System with others.
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