When you watch a 30-minute episode of any popular house-flipping show, don’t come away thinking you’ll pocket tens of thousands in profits for 30 minutes of effort – you won’t. There’s a little more to do between the time you buy a distressed house and when it’s ready for a prime time sale.

There are three critically important criteria for how to rehab or flip a house:

1. Investing in the right house in the right neighborhood.
2. Making the right repairs and renovations.
3. Getting in and out of the deal quickly.

How to Rehab or Flip a House Begins in the Right Neighborhood

Because you want to maximize your profit, the right neighborhood for rehabbing and flipping is upper middle income. These are neighborhoods for second and third-time buyers. Places where buyers that are more prosperous are buying up.

Top income neighborhoods aren’t attractive because these people want to customize their own homes. They aren’t going to be very receptive to remodeling choices you’ve already made. Neighborhoods for first-time buyers aren’t a good choice either because these buyers are too price sensitive.

Once in the neighborhood, it’s time to determine the after repair value (ARV). You’re actually dealing with two different processes that blend together. First is the combined total of the purchase price plus the cost of repairs (don’t forget holding costs). This is the minimum of what you’ll have invested in the house after repairs. Your profit goal for how to rehab or flip a house is to be around 70% of the ARV.

Several ARV Options to Value a Rehab or Flip

You almost certainly have the skills to do your own MLS research and double-check it on websites like Zillow. But if this is your first project or you screwed up the ARV on your last project, you want to dig deeper.

Start with your wholesaler. A good wholesaler will have done some or most of the research for you. This is a starting point but it’s just that – a starting point. If the wholesaler has been sitting on the deal for a few months, his/her information is out of date. And of course, this person has a bias to skew the numbers in his favor. Also, he might not have the current pulse on contractor and material costs. It’s a beginning but not the final answer for how to rehab or flip a house.

The market analysis is valuable. If there are real estate agents involved with the deal, there will be a comparative market analysis (CMA). If you ask for a suggested listing price on the house you intend investing in, be sure the agent understands you will be making repairs. Be as specific about the repairs as you can including the quality of the materials to be be used.

Pay for a broker price opinion (BPO). This will be similar to the CMA but the broker should be independent from the transaction. The CMA will probably come from an agent involved with the sale of the property. Since the broker won’t make anything from the sales transaction, you have to pay a nominal fee for the BPO. BPOs are done either as an exterior or interior assessment. You want an interior BPO. Just as with the CMA, be sure the broker doing the BPO is fully aware of what repairs and improvements you are planning to make. Brokers doing BPOs are often among the most experienced in the field. His or her opinion of the ARV should be one of the most trusted conclusions you receive.

Pay for a before and after appraisal. Again, you want the “as-is” and “as-repaired” values. This will almost certainly be the most expensive estimate you have prepared. If you are already comfortable with the numbers you’ve received from others, you may decide to skip this one. Also, keep in mind that if you’ll be borrowing bank money or the end buyer borrows bank money, separate and additional appraisals will be required by each bank involved.

Somewhere in this mix, you might have an inspector involved. Inspectors aren’t generally qualified to give a comparable analysis. However, they are great resources as a second set of eyes to be sure you haven’t overlooked anything else needing repairs.

Ultimately, you need to take all of these into account to arrive at your own proforma conclusion. A final step for how to rehab or flip a house is sharing your conclusion and the background numbers with a mentor, rehabbers that are more experienced, real estate agents, members of your investment club, and others whose opinion you trust on the subject. Still, it’s your money and profit on the line in the end.

How to Rehab or Flip a House Becomes Most Profitable When You Make Mom Happy

You want to strongly consider what the mother in the family finds important when deciding how to rehab or flip a house. Sure, dad wants a workshop in the garage. However, the most important renovations are made to the kitchen, bathrooms, and master bedroom. Those are traditionally the domains of the woman of the home. When you make her happy, you’ll get your full asking price.

As you consider the remodel, here are some of the upper middle class features many moms want:

1. A mud room on a back or side entrance for the family’s muddy shoes and sports equipment.
2. A laundry room is an essential element that is often more important than an extra bedroom. Placing this next to the mud room is even better.
3. There is never enough storage for a growing family.
4. In the kitchen, mom always wants the very best. She wants the latest appliances, faucets and sinks, countertops, floors and cabinetry and yet for the kitchen to be functional for the entire family to enjoy.
5. A spa in the master bath will seal the deal.

Highly experienced rehabbers often pick a niche. For some, it’s houses with a mold problem. Others specialize in foundation repairs or fire damage. These can be great niches that few other rehabbers venture into – for good reason. These can be highly profitable when you have the expertise to pull them off. Or you could lose your shirt. For those just learning how to rehab or flip a house, it’s best to stick with the proven formula of buying at the right price, in the right neighborhood, and rehabbing to make mom happy.

Real estate investing is all about finding creative solutions that work for you and others. What you need to do now is TAKE ACTION!

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.

If you found this information useful, please visit again soon at wendypatton.com.

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

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

How many rental properties do you dream of owning? Most investors want to own as many as possible. A long time ago I also believed owning as many properties as possible was the best answer…. Until I didn’t think that any more… It took a leap of faith, but one day I took the time to consider the pros and cons of owning multiple properties. I figured out the number of properties I really wanted to own out right is a big Ø – even as a highly successful real estate investor. What I discovered is what I really wanted is to control as many properties as possible without the hassles and financial commitment of ownership – and you should too! The magic happens when you understand the wealth building capability of lease options and sandwich lease options.

The Con Side of Owning Multiple Properties

For most real estate investors, it’s counter-intuitive that merely controlling properties is financially superior to outright ownership. From highly experienced investors to beginners, available cash for investing is typically in limited supply. Experienced investors might own 20 rental properties with a book or retail value of well over a million dollars. Those rental properties can be leveraged (borrowed against) to free up liquid cash, but that means putting owned properties at risk as well as taking on debt that has to be eventually repaid. For the purpose of understanding the pros and cons of owning multiple properties let’s assume the experienced investor has $15,000 in liquid cash to invest. The same amount that a beginning investor is likely to start with. For both experienced and beginning investors $15,000 is enough to qualify for a mortgage to own a $150,000 rental house. The experienced investor might be able to stretch this amount into 2 properties based on historic performance. But neither investor, new or seasoned, is likely to take ownership of more than 2 houses.

The Pro Side of Controlling More Properties Using Lease Options

When you understand lease options, it becomes clear you can control and profit from more properties than if you own your rentals. Rather than a $15,000 down payment to own a rental, that cash is better applied as option fees to take control of multiple houses with options to buy at a later date. As a knowledgeable investor, I’d consider a $2,000 option fee when buying a $150,000 house to be on the high side. But we’ll be conservative here and go with that number. The result is $15,000 gives you control of 7 houses rather than ownership of 1 or 2 houses. Your monthly positive cash flow from rental income is going to be about the same whether you own or lease those houses. To keep the example easy, assume rent income each month is $1,500 (1% of the purchase value). From that income, you can expect to pay about $675 per month towards the mortgage if you buy or the same amount if you lease. Both ways it leaves a gross monthly profit of $825 (before taxes, insurance, and maintenance/repairs).

ROI is the Big Pro With Lease Options

Here is the big kicker when it comes to the pros and cons of owning multiple properties versus lease options. The owner bought 2 houses (at best) for the $15,000 investment. That creates a gross monthly profit of $1,650 ($825 X 2). The lease option investor took control of 7 houses. This creates a gross profit per month of $5,775 ($825 X 7). The clear winner is the lease option investor who earns $4,125 more each month ($5,775 – $1,650) than the rental owner. As big of advantage as this is, it becomes much more rewarding when you consider the return on investment (R0I) ratio. Below is a simplified calculation which excludes taxes, insurance, and repairs but all things being equal these should be in proportion for each house regardless if it is owned or leased (lease options can be negotiated to pay a smaller portion of those costs). The annual gross ROI for the owner is 132% (12 months X $825 rent profit X 2 houses = $19,800, $19,800 / $15,000). The gross ROI for the lease option investor is 462% (12 months X $825 rent X 7 houses = $69,300, $69,300 / $15,000). Controlling the property with a lease option is the clear financial winner over owning the property.

Even More Positive Income From Lease Options

Let’s keep in mind, owners do gain appreciated value that option investors will not gain. First, it will take many years before the appreciated value catches up to that huge difference in ROI. Furthermore, the option investor will have pulled in even more profits over a couple of short years and then moved on to repeat the deal several times long before the appreciation (which isn’t liquid) catches up. This is where the sandwich lease option becomes far superior when considering the pros and cons of owning multiple properties. The lease option investor puts an end buyer in place who pays the rent until the purchase is completed. The end buyer pays you a lease option fee which almost immediately returns your original investment. When your investment becomes ZERO, your ROI becomes infinite. Typically, you even profit by collecting a higher option fee than you pay. In our example, the rent profit was a wash between the owner and the lease option investor except that the lease option investor was collecting positive rent on 7 houses instead of 2. The lease option investor collects another big payday when the end buyer completes the purchase. For our example, we’ll assume the lease option investor sells to the end buyer for $10,000 more than he or she has an option to pay the original owner. The sandwich lease option results in a $15,000 initial investment that is returned to the investor almost immediately + a gross rent profit which is far superior to the house owner + a sales profit which exceeds the owners appreciated value. All without the responsibilities and risks of ownership. When it comes to the pros and cons of owning multiple properties, the lease option wins hands down. By Wendy Patton For more than 30 years, I’ve used the Sandwich Lease Option System to earn my students and myself 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 this fact and my personal success that I share the Sandwich Lease Option System with others. If you found this information useful, please visit again soon at wendypatton.com. For more exclusive content, please subscribe to my RSS Feed and YouTube Channel. What did you think of this article? Please leave a comment below.

The best time to invest in real estate was 20+ years ago. The second best time is now. If you’re young and in your 20s or 30s or 40s, in 20 years you’ll be glad you invested today. Based on my decades of experience, I know how true this is. And I know that leases with an option to purchase are the best low cost way to get started.

Another major advantage is that lease options are the least risky but highly profitable niche for investors getting started (short of being given a house). Although rent to own has been a popular way to invest in homes for several decades, it’s still unfamiliar to many people. That’s why I continue to help people understand how this works. And why I often explain how to find rent to own properties.

Finding these properties is different from finding traditionally financed sales. Almost always, the seller is motivated to immediately start generating cash flow and finalize a sale in the not too distant future. When you do find a RTO seller, you want to learn what that person’s motivation is before drawing up a lease/purchase offer. When you know their motivation, you can more easily put together an enticing offer.

How to Find Rent to Own Properties That Work for You

Today’s market is beginning to lean in favor of buyers. That’s an advantage for investors that know how to find rent to own properties. As the sellers’ market slightly softens, there will be more sellers looking for a way to generate cash flow from a house that didn’t sell quickly. But that doesn’t mean the seller has given a single thought about a lease option arrangement. Very few will be advertising for this opportunity.

What you need to do is find these people and educate them about why a rent to own or lease option is a good cash flow opportunity for them. Once you have their attention, you help them further with a sandwich lease option that minimizes the work the seller has to put into the deal. In exchange for you being in the middle, you create three distinct profit points for yourself.

You want to begin by talking to local real estate agents. Although agents don’t typically specialize in how to find rent to own properties, you need this group, that is the most active in your local market, to know what you are looking for. Agents know sellers with a listing that is getting long in the tooth who need to generate cash flow from the property. Agents also talk to each other a lot. Even if the two or three you talk with don’t have any leads, they probably know other agents that have what you are looking for.

Reluctant Landlords – How to Find Rent to Own Properties

While reluctant landlords are always worth pursuing for lease options, you’ll find even more of these as the sellers’ market softens. Reluctant landlords tend to be people who have already taken action to create cash flow from a vacant property. People who take action are open to other opportunities. You offer to not only keep their rent cash flowing but to also the real possibility of selling the property. A double win for the reluctant landlord.

“For Rent” signs can be an even better opportunity for how to find rent to own properties. These can be either an experienced landlord with yet another vacant house they need to clean and find a new tenant for, or a want-to-be seller reluctantly getting into the landlord business.

Experienced landlords with vacancies have familiarity both buying and renting real estate. They consider themselves to be professionals and will be open to creative types of real estate transactions. When the house is vacant, they also have motivation to sell creatively.

Key to how to find rent to own properties is about knowing the other person’s motivation and offering a creative solution that works for both you and the seller. What’s important is that you have a thorough understanding of what you are offering and can explain it in a way that both the new and the experienced landlord easily understands.

There are Many Ways for How to Find Rent to Own Properties

Another method for how to find rent to own properties is by searching for houses in your location of interest and simply asking the seller if they are interested in participating in a rent to own agreement. Again, be sure to have a solid pitch ready to go. Also, take the time to get to know the seller on a friendly basis. You’re likely going to have a relationship with him or her for a year or two.

These are only a few of the ways of how to find rent to own properties. Others include well-worded advertisements in local classified thrift newspapers, bandit signs, and of course craigslist. The sandwich lease option is the most attractive investing method I know of. You first take control of the property for a couple of hundred dollars. You then put an option buyer in place that takes on most of the homeownership responsibilities until they make the purchase and take on full ownership. The Sandwich Lease Option lets you make a big profit for a small investment.

Besides showing how to find rent to own properties, I’d enjoy showing you all of the other insider techniques I’ve developed over the years. Everything from effectively explaining the benefits to sellers to creatively writing deals that close.

Remember, the best time to invest in real estate was 20 years ago. The second best time is now.

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.

If you found this information useful, please visit again soon at wendypatton.com.

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

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

There are always sellers in the marketplace. There might not always be a lot of sellers motivated to sell on a lease option agreement but there will always be more than you need if you know how to find them! Today, the broad market is slowly changing from a seller’s market to a buyer’s market. This means more opportunities for investors.

This is the right time to learn how to find a seller now. There are several ways to go about this and if you’re an experienced investor you probably already have resources in place. If you building your investment business, these tips help you stay on the right track.

The Basics of How to Find a Seller Now

For the most part, investors aren’t looking for traditional “retail” houses. Investors are looking for properties that soon-to-be homeowners aren’t normally interested in. Investors want distressed properties and discount properties. Still, different investment strategies target different properties within these subcategories. For instance, fix and flip investors mostly target distressed properties. Properties that can be bought cheap, repaired, and flipped for a big profit.

Lease option investors are looking for a different property type. Sandwich lease option investors are not going to own the property. They don’t want to invest a bunch of money in repairs. How to find a seller now for a lease option generally comes down to the equity the seller has in the house. You are looking for either one of these conditions:

1. The seller does not need their cash out of the house.

– Or –

2. The seller does not have any equity in the house.

The other two common conditions that usually go along with these are that the seller needs to leave the house or the house is already vacant. These don’t guarantee the person will be interested in a lease option but if these conditions don’t exist, the seller isn’t likely to consider a lease option. If you don’t have these conditions, save yourself a lot of time and effort by moving on to another prospect.

How to Find a Seller Now Means You Offer a Solution

How to find a seller now means that you need to be offering the seller a solution that she/he is looking for. Your offer is what I call “Good Debt Relief”. You must understand what you bring to the table so that you can fully explain it to the seller. She/he needs to understand what’s in it for them.

Good Debt Relief is pretty simple. The seller has an already vacant or soon to be vacant house that they have to make mortgage payments on. The house is not producing an income. The debt payment is a big rock they have to carry without relief. When you offer a lease option, you offer an income stream to pay that debt. That income stream is Good Debt Relief.

You might think that severely limits the number of sellers interested in a lease option. It does thin the crowd but that’s a good thing because this enables you to focus your energy and efforts to sellers that are much more likely to close the deal. And there are a lot more candidates out there than you might first realize.

Good Lease Option Seller Candidates

How to find a seller now has an abundant number of candidates. People or couples that own two or more houses but only live in one of them make great candidates and there are more than you might think. How many people in these situations do you think you can find?

• Recently or are about to transfer to a job in another city.
• Recently married with the bride and groom both previously owning a home.
• Built or bought a new home without selling their previous home.
• Inherited a home in another city or the person has no need for the inherited home.
• Landlords that are burned out from dealing with calls about a plugged kitchen sink on Thanksgiving from tenants who never pay the rent on time.
• Landlords that are ready to retire.
• Vacation homes that are not used or the owner retired to it and has a vacant second home back in the city.
• There are many others.

Do you see the common thread here about how to find a seller now? That thread is that these people own at least two homes but are living in only one. They probably don’t need the money because they can afford to pay two mortgage although they probably don’t want to pay two mortgages.

These make natural headlines for your marketing campaign to find qualified sellers. Especially in free classified ads where you can run multiple advertisements with different headlines. Most of these people won’t see themselves in classified ad headlines reading, “Lease Option Sellers Wanted” or “Looking for Seller Contracts”. However, they do see themselves in more targeted headlines like “Do You Want to Sell Your Second Home?” or “Do You Want to Sell Your Rental House?”, or “Stop Paying Two Mortgages”.

There are still many, many possibilities for how to find a seller now. Others worth considering include real estate brokers, estate lawyers, maybe even mortgage brokers who turned down a loan for a second home. Real estate brokers can easily be shown how to find a seller now. Your local MLS probably doesn’t indicate if a house is vacant but brokers usually know or can find out. You can also look at interior photos on MLS to see if the furniture has been moved out.

Do you want to know more ways of how to find a seller now? The entire second category of “The seller does not have any equity in the house” wasn’t even covered here. To learn more about how to find a seller or other real estate investing strategies please visit my website www.wendypatton.com or email info@wendypatton.com.

What you need to do is TAKE ACTION NOW!

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.

If you found this information useful, please visit again soon at wendypatton.com.

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

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

One part of sandwich lease option investing that doesn’t get much attention is managing the tenants and the property. A big part of the reason this doesn’t get much attention is because this investment strategy is mostly passive income. Meaning once you have the deal in place, there isn’t much ongoing work to generate the continuing income.

However, you are the professional in the middle of sandwich deals. You still have a responsibility to both the seller and the buyer. Fortunately, managing the seller is minimal to non-existent. As long as the seller is receiving his/her monthly check and the house isn’t being seriously harmed, almost all sellers happily sit back collecting a monthly rent check knowing they are likely to collect a big check when the house sells in a year or two.

Tenants Have Responsibility in Sandwich Lease Options

The little bit of management time that you do put in mostly involves the tenant/buyers. But keep in mind this is NOT about cleaning out rain gutters and fixing a broken water heater. The properly written sandwich lease option makes the tenant responsible for all major and minor maintenance as the future owner of the home.

In the real world, tenant/buyers can’t always make immediate and necessary repairs. Because I live in Michigan much of my investing is here also. When a furnace goes out during a Michigan winter, it’s crucial to get that fixed. Heat is necessary. When a tenant can’t make this happen, I might need to step in with a helping hand. But one of the big benefits of sandwich lease options is that my involvement and expenses are minimal. I can have a HVAC technician out to the house with a short phone call. As an investment professional, you have options to manage the cost of the repair. One option is the tenant pays as much as they can on the spot with the balance being charged to your account or the entire cost is charged to you but the tenant pays the bill with his/her next paycheck. However you work out the details, any amount that remains on your account is ultimately added to the sales price of the home paid by the tenant/buyer – as long as you write the original paperwork correctly.

Something I’m very careful about when it comes to tenant/buyers is not giving them my home address. All payments and correspondence is mailed to my office or a P.O. Box. The phone number I give them is only for a phone dedicated to my business. It doesn’t happen often but in case a deal goes sour and you have to evict the tenant, you don’t want a disgruntled, grudge-bearing tenant showing up on your doorstep. But you have a responsibility to keep open lines of communication.

Transitioning Between Seller and Tenant Occupying the Home

You are the meat in the middle of a sandwich lease option. One of your last steps putting the deal together is moving the seller out and the tenant/buyer in. Always have complete documentation of everything regarding a tenant moving in. Probably your most important thing will be to have a videotaped walk-through or check-in with the tenant. It’s really good when you show them on tape verbally acknowledging the condition of everything, whether good or bad. Hopefully not too much bad – but maybe they’ll point out something that you somehow overlooked. If so, fix it immediately.

Technically these are still tenants until they close on the purchase. It’s still important to keep the place habitable and treat them like a tenant. If you treat them like an owner, a judge might also treat them like an owner which could nullify the option. You do have the special maintenance and repair clause in the paperwork but when the tenant/buyer is first moving in:

1. Always change the locks from the previous tenant – if you don’t change them and someone still has a key, you could open yourself to serious liability.
2. Clean the carpets.
3. Repair any paint problems.
4. Make it habitable.

When you properly screen your tenant/buyers, you shouldn’t have much trouble once they have moved in. Still, this is a transition from them being tenants to becoming homeowners. During the first couple of months some may still treat you like a previous landlord. They give you sob stories about not having the rent. Most of us can’t afford to carry another family. My strong philosophy about this is, “If the tenant doesn’t pay their rent – you are paying it for them.”

Using the sandwich lease option, you have the best of all real estate investment strategies. As a temporary landlord, you receive positive monthly cash by collecting rent and you make the big flip profit when the buyer completes the purchase. You control the property but don’t own it. It all comes with very little hands on management or money out of your pocket.

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.

If you found this information useful, please visit again soon at wendypatton.com.

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

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

As an investor, you have an arsenal of options available when it comes to your real estate investing strategy. You will be wise to consider several before deciding which best fits your current and future needs. There are several variables that go into your decision:

• Investment funds you have available or can raise?
• How much you want to make in profits?
• How much risk you want to take?
• How fast you want to pocket your profits?
• Other variables specific to your needs?

Rent to Own Properties Can Be the Best of All Worlds

Rent to own properties work well in all scenarios. Especially my favorite, the sandwich lease option. These are your opportunity to collect reliable monthly rent as a landlord without the hassle of making most of the repairs. Once the deal is in place it becomes a mostly passive income stream. Based on my decades of real estate investing experience, I’m firmly convinced that lease options are the least risky but highly profitable niche for investors.

You want buyers to treat rent to own properties almost as a purchase agreement. Although they are renting, the intention of purchasing is very real. Probable buyers should have an inspection done before signing the contract. Then the buyer needs to take the step of working with a mortgage professional to develop a plan enabling him/her to qualify for a mortgage before the option period expires. This creates the mindset of buying the home. The tenant/buyer takes better care of the home. Your contract specifies they make and pay for most repairs, which saves you the time and money that typical landlords anguish over. At the same time, you collect a higher than market rent with the full expectation of a big profit when the sale closes in a year or two. This is the best of both worlds. The third best world with rent to own properties is the house is appreciating in value all of the time – even if this particular purchase isn’t completed.

Rent to Own Properties is a Solid All Around Strategy

Real estate markets change. They go through a well-known cycle. There are hot market conditions, normal markets, and cool or cold markets. Market conditions don’t change overnight but there are leading indicators. We’ve enjoyed the current hot market since about 2012. This was a sellers’ and landlords’ market. Landlords enjoyed ever-increasing rents. Rent to own investors did also. Rehab flippers enjoyed ever-increasing sales prices. Rent to own investors did also. Today, rent to own properties will continue flourishing as the market moves from hot to normal and will continue prospering even when the market eventually cools off.

Something good for buyers (and rent to own investors) is that most of the foreclosures, short sales, job losses, and other credit alignments from past years are now deleted from credit reports. But that doesn’t make it clear sailing for many homebuyers. As the mortgage market changes, interest rates have been rising for at least a year. Just as important (as a result of past credit troubles) banks are now requiring people to have better credit and longer employment histories than in past years. Rent to own properties will continue thriving in this environment while other investment strategies begin struggling.

Why Rent to Own Properties Will Continue to Prosper

The buyer’s credit score and down payment will benefit in the evolving real estate market. Rent to own properties provide a built-in mechanism to help people rebuild their credit by making timely rental payments during the contract period. This increases the likelihood that they’ll be approved for a mortgage to buy the home a few years down the road. The lease option fee applies to the down payment. Even if that isn’t enough for the full down payment, the buyer now has time and incentive to save the remainder during the option period. At the same time, sandwich lease options continue being favored by investors…

You don’t own it, no one can sue you for it, no one can put a lien against it, this is low risk investing. Your expenses are minimal because the tenant-buyer pays for repairs and maintenance. You pay a small “option fee” for control rather than a hefty down payment. That makes it low cost. Exactly what you’re looking for is a low risk and low cost investment property.

Whom is lease option investing suited for? The short answer is any investor. Beginning investors that are cash poor find it particularly appealing. As does the experienced investor that has maxed out his/her ability to obtain new financing. Also, every investor in between. Real estate investing is about “controlling” as many properties as you can. It is NOT about “owning” as many properties as you can. This makes rent to own properties ideal.

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.

If you found this information useful, please visit again soon at wendypatton.com.

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

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

What a great question to consider! The number of variables going into this answer would easily fill a book. Just to narrow this down, lets’ define cashing out as selling your real estate holdings to use the cash for another purpose. Maybe it’s retirement and you want to move your money into a super secure investment like an insured savings account where the risk of losing money is almost zero but your money won’t keep up with inflation. Or maybe you just want to take all the money to go on a wild spending spree starting with a trip around the world.

First Step When Deciding to Cash Out or Reinvest

Hopefully, as a real estate investor, you find yourself in the enviable position of needing to decide whether to cash out or reinvest the appreciated value of your existing properties. Many investors that bought at the bottom of the market (around 2012) are now in the desirable position of controlling property that has significantly appreciated in value.

This means reviewing your portfolio to decide if holding is the right thing to do or if cashing out is the best option. A few important variables to consider include:

• How much wealth you have and how much you want?
• How diversified your portfolio is?
• Are there better investing opportunities available?
• Your current ROI?
• Major life events such as retirement or funding a child’s college education?
• Switching from active to passive income streams?
• Many others based on your personal circumstances?

Here are basic possibilities that I think help most people make the decision whether to cash out or reinvest:

Cash out when the effort to own and manage properties becomes more painful than the joy of earning.

-OR-

Reinvest towards an income stream that provides the highest return with the least amount of work.

Real Estate Cycles

Real estate investing goes through cycles. There are times to buy (low point of the cycle), times to hold (middle), and times to sell (high). This isn’t complicated. All types of investing are about buying low and selling high. What is more complicated is deciding whether to cash out or reinvest your real estate holdings.

The ideal time to buy during the current cycle  was 6 or 7 years ago (low point). Since then, rents and property values have been steadily increasing. These are the years to hold and profit (mid point). I don’t have a crystal ball but based on many years of experience, now is the time to be considering selling at the high point. With that, comes the decision to cash out or reinvest your real estate holdings.

Reinvesting Options

You might want to diversify your investments outside of real estate into something like gold or the stock market. Those aren’t my forte so I’m not going there. What I do know is there are much better options than cashing out to finance that around the world trip and a life of luxury. Mainly because real estate investments are a chance to have your cake and eat it to! What I mean is you can sell a property, take some cash out for that trip, and reinvest most of it to continue a passive income stream enabling a life of more luxury.

Perfectly timing the real estate cycle is impossible. However, each phase of the cycle is long enough that you have ample time to take advantage of each phase. With this being the high point of the cycle, it may not be the exact time to sell but it is the right time to be considering what you will reinvest in during the inevitable low point. You should also be working on marketing materials for the properties you anticipate selling while we are still at the high point.

Regardless of the cycle phase, I’m always looking for sandwich lease option opportunities. These work fantastically in all phases and are particularly profitable during this high point because there are so many people that want to buy but are just a whisker away from qualifying for a loan. The sandwich lease is the perfect bridge between renting and homeownership.

Once we enter the low point, you’ll find me writing about and emphasizing how to invest in distressed properties that include foreclosures, REOs, short sales, and how to find individuals desperate to sell.

Cash Out or Reinvest Tax Considerations

If you cash out and pocket the money you are going to be hit with a huge tax bill unless you have a tax strategy. On the other hand, reinvesting in real estate offers the best tax deferred and possibly tax free strategy available with the 1031 Tax Exchange. Note: the tax free version requires an additional strategy involving trusts, annuities, or something similar. But deferring 100% of taxes is available to all real estate investors any time they sell.

Depending how long you’ve owned the properties, moving the money elsewhere will almost certainly result in long or short term capital gains taxes along with state and local taxes. When you reinvest in real estate, the 1031 section of the IRS tax code enables you to reinvest in a different (typically more valuable) property without paying the capital gains taxes or the depreciation recapture tax.

As you ponder whether to cash out or reinvest, it’s a good time to consider using a 1031 exchange to move into a more passive income property. One delivering reliably high income but that is low maintenance and less management.

The 1031 exchange does require that you make a “like-kind” investment. That doesn’t mean that you need to replace your existing eight single-family houses with different eight single-family houses. It only means that you have to replace your real estate investment with another real estate investment. To receive the full tax benefits, you do have to purchase a replacement property that is of equal or higher value. Instead of eight single-family houses, that could be a 60 unit apartment building with an onsite property manager.

What you need to do now is TAKE ACTION!

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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