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Working With Realtors® as an Investor

Posted on by Wendy Patton Blog

Does your Realtor® understand ARV? If you’re working with Realtors® as an investor, he or she should be able to intelligently discuss After Repair Value (ARV) with you. Unfortunately, most Realtors® aren’t fluent in the language of investors. They’re fluent in calculating down payments and pointing out the shiny stainless steel appliances in the kitchen – the language of white picket fence buyers.

An investor savvy Realtor® won’t be asking how many children you have and if you want a backyard swimming pool. Instead, he or she is asking what your investment strategy is? Is it fix to flip or long term rentals? Are you looking for distressed properties or turnkey rentals with a qualified tenant in place? Do you want to hear about every property that comes on the market or is it the agent’s responsibility to screen for only the best opportunities?

How to Find the Right Realtor® When Working with Realtors® as an Investor

Realtors® interested in investment properties hang out at the same places as investors do. These aren’t the open houses showcasing the most polished house in a neighborhood. However, it can be worth your time checking out Realtors® that specialize in the types of houses and neighborhoods you invest in. Drive through these neighborhoods looking for “For Sale” signs. Also call on listings in marketing brochures. But remember they need to speak your investor lingo.

Just because an agent is the office “Rock Star” doesn’t make him/her a good Realtor®` for investors. Working with Realtors® as an investor still means they understand phrases like “hurdle rate”, “cap rate”, “rate of return”, and “income vs. capital gains”. You can check out some Realtors® by making telephone calls or sending out emails asking the right questions.

A better avenue to finding a Realtor® knowledgeable in working with investors is one of the thousands of real estate investor groups across the country. Most of these groups welcome real estate professionals as members. Realtors® join these groups because they want to work with investors. Even if he or she is new to the group and not yet up to speed, you know you are working with someone interested in the investment world. You can find local groups on websites such as REIclub.com and NationalREIA.com or by simply doing a Google search for real estate investing groups in your city.

How to Best Work with Realtors® as an Investor

One way you benefit by working with Realtors® as an investor is having them keep you current on market trends. You probably have your own secret formula for rehabbing houses that sell fast and for top dollar. But the market is always changing. Today’s megatrend is driven by the Millennials that now dominate the market. Are you fully up to speed on their needs and wants?

Where are the best rental opportunities? Which neighborhoods are ‘hot’ right now for sales? Where are new jobs being created or new schools being built? This is information Realtors® are often more tuned into than investors are.

However, it’s a two way street. The more he/she knows about your objectives, the more useful a Realtor® can be in tailoring your efforts to help achieve them. Once they master bringing you the best deals, he/she needs to specialize in is closing the deal tomorrow.

When you have a shortlist of Realtors® wanting to work with you, the next step is having a face-to-face conversation. You need to be clear about what it means to be working with a Realtor® as an investor. You need to be clear about your investing strategy. You need to let him or her know your price range, your neighborhoods, and what your exist strategy is. You need to let them know if you expect to be shown the interior of every potential house or if the Realtor® only needs to forward you prospective houses and you’ll drive by to view the outside but only ask for access to the interiors when you are truly thinking about making the purchase.

Ultimately, working with a Realtor® as an investor often works best when he/she is an investor them self. There is a possible conflict of interest here because the Realtor® might scoop up investments that you would have been interested in. However, there are usually more than enough to go around. Another work around to this issue is having more than one Realtor® working with you. You shouldn’t have any trouble finding as many investment grade properties as you want.

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.

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

 

Selling Real Estate with Lease Options

Posted on by Wendy Patton Blog

Selling real estate with lease options has more upside than many investors or homeowners realize. And a lot less downside. The downside is less than being a traditional landlord without other options. My team and other investors that have profited by selling with lease options are fully aware of the many benefits. Here, I share my knowledge and information with homeowners exploring their selling options.

The biggest benefit from selling with lease options is the ability to almost immediately begin bringing in an income from a property that is otherwise draining an owner financially. When you have a vacant home that you are making payments on, turning it into positive cash flow is a benefit X 3. The new income both covers what you are paying out for the mortgage plus immediately puts money in your pocket every month. You’re also going to collect a nonrefundable option fee. And still to come is all of your profit from the final sale.

Benefits When Selling Real Estate with Lease Options

Done correctly, selling on a lease option brings you much better tenants. This is where several of the benefits are at when selling real estate with lease options.

Tenant/buyers have skin in the game. This begins with the nonrefundable option fee. Tenants understand if they become delinquent with the rent or fail to comply with other terms, they will be out the option fee. Traditional tenants only risk a small security deposit.

Tenants are better financially qualified. People wanting to purchase a home are more motivated than average tenants. They don’t get into your house until they come up with the option fee. They have demonstrated the ability to manage and save money. A wise seller does a credit and background check. Tenant/buyers should meet with a mortgage broker to understand the steps needed to qualify for a mortgage before the end of the option period. Overall, these are among the most financially sound tenants you can find.

Tenant/buyers reduce your ownership costs. Few traditional landlords shift maintenance and repair costs to the tenant. However, this is common when selling real estate with lease options. Tenant/buyers can certainly be contractually responsible for yard care. And they can be responsible for other upkeep. Maybe it’s a fresh coat of paint, cleaning leafs out of the gutters in the fall, or repairing a fence that blows down in a windstorm. Typically there will be a financial limit. The tenant may only be responsible for up to $300 per month in maintenance and repairs. Or it could be the first $2,000 to replace a roof that blows away in a storm ($2,000 should cover your insurance deductible). Just as importantly, the anticipation of ownership encourages them to take better care of the property. And you won’t be getting calls on Sunday morning to deal with a plugged toilet.

You remain the owner of title. As the property owner, you do not transfer title to your property until the purchase is complete. You only transfer the title after you receive all of your money when the deal closes.

Deal Structure When Selling Real Estate with Lease Options

Selling real estate with lease options is about creative financing. You are free to customize the agreement in almost any way that you want. I do believe in win-win agreements. You want to completely protect yourself and get top dollar for your house. Also, the agreement should positively motivate the buyer to complete the deal so that he/she gets their home and you get your money.

I encourage you to use two separate contracts. One is the lease agreement. The other is the option to purchase agreement. Separate agreements protect you as the seller so that monthly rent payments aren’t interpreted as being applied towards ownership. Typically, the option fee goes towards the down payment (only when the purchase is completed) and this fee should be documented in the option contract – not the lease agreement.

Almost everything else is negotiable. Usually the purchase price is agreed to at the beginning of the option period. However, there are methods to establishing the price shortly before the sale closes. You also have a lot of flexibility when writing the maintenance/repair agreement.

There needs to be a contract clause clearly explaining what happens if conditions of the lease agreement aren’t fully met. There also needs to wording describing what happens if the purchase isn’t completed before the option period expires. In a seller’s market, you want to be able to sell to another buyer. You may also want to be able to collect another fee to extend the option period. In a buyer’s market, you may prefer language enabling you to waive an additional option fee. What works best for both you and the tenant/buyer is what should go into the agreements.

For many reasons, selling real estate with lease options is better than most sellers realize. When the tenant/buyer completes the purchase, the seller accomplishes the goal of selling the house and also earns rent from the beginning. In addition, lease option buyers are willing to pay top dollar due to their unique circumstances. The seller receives more money for the home.

There are even more benefits to selling with lease options. Without a doubt, you now understand why I fully believe that lease options are the fastest, easiest, and least expensive way of investing in real estate.

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.

Rent to Own Properties Done Ethically

Posted on by Wendy Patton

As a rent to own properties investor, your goal should be putting people into houses and turning renters into homeowners.  A ‘few bad apples’ give the rent to own investment strategy a bad name, which is a shame, because it is a great strategy.

I don’t believe in the strategy of repeatedly churning rent to own properties to collect multiple option fees from multiple potential buyers. Instead, when done correctly, the rent to own properties strategy is a win-win for both the buyer and the seller. By doing this ethically, most buyers complete the purchase, your good reputation grows, buyers tell family and friends, with more deals flow to your business.

Rent to Own Property Buyers Need to Understand the Details

For the rent to own properties strategy to work best, potential buyers need to be confident that they’ll be ready to make the purchase when the lease term expires.

If the purchase isn’t completed, they’ll have paid substantial nonrefundable option money with nothing to show at the end. That becomes what they tell family and friends.

Buyers need to read and understand every word of rent to own property contracts and know exactly what they’re getting into. These are not standard purchase agreements. Each one is unique. These people may not have ever purchased a home before. Sellers should encourage buyers to seek the help of a qualified attorney. A qualified real estate attorney who clarifies the contract and their rights, before signing anything.

If they decides not to or can’t purchase the property at the end of the lease, the option simply expires. If the wording is ‘lease purchase’, without the word ‘option’, the buyer could be legally obligated to purchase the property but have not ability or desire to do so. Clarifying the wording is one of many reasons buyers should have the contract vetted by a real estate attorney before agreeing to it.

Rent to Own Properties Offer Buyers Many Benefits

Most tenants considering rent to own properties don’t think they can qualify for a mortgage.

The fact is that many won’t. But today is the time to learn what it takes to qualify in the future, maybe in 2018. Interest rates remaining near all-time lows means that mortgage payments are also at all-time lows.

Myself and other real estate experts fully expect home prices to continue appreciating in value. That means home affordability is more attractive today than it will be for the foreseeable future. Not being able to qualify for a mortgage today doesn’t mean you can’t lock in the best purchase opportunity that you may see during your lifetime.

Best Place To Start

Granted, sellers of rent to own properties often sell for a premium price. That should NOT keep buyers out of the market, especially when they are close to qualifying for a mortgage. Locking in the sales price of an appreciating rent to own property possibly means the sales price today will be at, or below, market value when the deal actually closes.

The best place to start is by achieving the FHA loan prequalification essentials:

  • An established steady employment history, at least two years with the same employer.
  • Consistent or increasing income over the past two years.
  • Your credit report should be in good standing with less than two 30-day late payments in the past two years. The minimum FICO score can be as low as 500 (subject to change).
  • Any bankruptcy on record must be at least two years old with good credit for the two consecutive years.
  • Any foreclosure must be at least three years old with good credit for the past three years.
  • Mortgage payment must be approximately 30 percent (or less) of your total monthly gross income.

If you can answer YES to these statements, you should have no problem qualifying for an FHA home mortgage loan. If not, rent to own properties allow you to work towards these goals over the next couple of years with a purchase price locked in today.

 

Rent to Own Properties Have Flexible Contracts

Buyers should treat rent to own homes as any other purchased agreement. They should have an appraisal done and have the home inspected before signing the final contract. Then the buyer needs work with a mortgage broker to develop a plan enabling them to qualify for a mortgage before the option period expires.

By working with real estate professionals, including an attorney, rent to own properties can have contracts drawn up to satisfy both the buyer and the seller. The seller no longer has a vacant house to deal with.  While the buyer is able to overcome down payment and mortgage hurdles.

 

Length Of Purchase Option Flexibility 

Part of the flexibility that comes with rent to own property contracts is the length of the purchase option. These typically range from one to three years. If the seller wants to cash out of the deal asap, they will want a short option period.  If the buyer needs more time to repair their, or increase the down payment, they’ll want a longer option period. In some cases, the seller decides to carry the financing after finding the buyer is reliable about making monthly payments. There are significant tax advantages for the seller when they takes installment payments versus a lump sum.  This is particularly true when it’s an investment property rather than a primary residence.

 

Rent To Own Properties Conclusion

Rent to own property agreements are among the most flexible real estate contracts available in this dynamic market. This article only covers some of the options and requirements. I have many other articles available and strive to keep information about rent to own properties current with today’s market. You’ll find more information by clicking here.

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

By Wendy Patton

For over 30 years I’ve used the Sandwich Lease Option System to earn myself and my students millions of dollars. I know there is plenty of opportunity in the real estate investment market for everyone 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.

 

 

Cash Out or Reinvest Real Estate Holdings

Posted on by Wendy Patton

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 in the current cycle (low point) was 6 or 7 years ago. Since then, rents and property values have been steadily increasing. Making these years the time 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.

The Buy, Hold, Cash Out or Reinvest Cycle

It may not have been clear then but it’s clear today that the time to buy was 7 years ago. The market was flooded with foreclosures, REOs, short sales, and individuals desperate to sell. Buyers were very few and very far between. Unemployment was stretching for historical highs. Foreclosures and unpayable debt trashed people’s credit ratings by the millions. If you didn’t have cash, even a stellar credit rating probably won’t buy you a mortgage. Still, creative investors found ways to gain control of properties for little or nothing down. But that was not the time to cash out or reinvest.

The past several years have been a time to hold as people got back on their feet after the financial meltdown. Today, foreclosures and bad debt are falling off people’s credit reports. An unemployment rate below 5 percent is considered a fully employed economy. Property values and rents have been steadily increasing. This may seem predatory to some people. However, buying those short sales and rehabbing foreclosures got many people out of bad situations. More recently, the lease with option to purchase has helped return countless people to homeownership. It was a win-win during tough times.

Right now, markets like San Francisco, New York City, and Los Angeles, are well beyond the last bubble peak in terms of pricing. If not declining in price, these have become price stagnant. Bidding wars are dwindling as the result of few buyers being able to afford or willing to pay peak prices. While real estate investing is always driven by local markets, today’s national circumstances strongly indicate a time to consider if you should cash out or reinvest.

Cash Out or Reinvest Considerations

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. The place I highly suggest you begin is by performing a thorough analysis of all investment properties that you currently own.

You may or may not have financial holdings outside of real estate but I’m only dealing with real estate investments. You want to take a very close look at your real estate holdings to prioritize a list of them from best performing to the least performing. This isn’t always about the property generating the most cash. If you’ve followed my on-going advice, you are controlling property with the least amount of your own money invested. Deciding to cash out or reinvest involves looking at the Return on Investment generated based on how much cash you put into the deal rather than just the amount of cash the property is throwing off each month.

Positive cash flow of $500 per month from an initial investment of $1,500 is much better than the same $500 positive cash flow from a $40,000 investment (reclaim your large investment). With that in mind, conduct a thorough analysis to prioritize your investments from best to least performing. Those at the bottom of the list should next be considered for cash out or reinvest options.  

Cash Out or Reinvest Options

Once you decide to take the equity out of your investment(s), you have several options. Among the most common are:

  • Bring in cash via an equity line of credit or equity loan. This typically brings in 70 to 75 percent of the appreciated value. And you still control the property. Maybe use the money for another bargain investment.
  • Take out 100 percent of the profit by selling. This brings in more cash but you lose control.
  • Offer seller financing to maximize your cash flow and profit while minimizing taxes.
  • Use the cash to invest in another property or two or three. Think “controlling the property for the least amount invested”. Also, think about a 1031 Exchange for this.
  • Use the cash to pay a balloon payment that is coming due on a high cash flow property.
  • Use the cash to take your family on vacation. Taxes will be owed.
  • You might be able to refinance at a lower interest rate to both keep control of the property and improve cash flow.
  • Keep the cash in a reserve fund for emergencies or until a fantastic investment opportunity presents itself.
  • Use the cash to buy real estate secured notes paying 6 to 8 percent interest. This gets you out of the landlord business while still generating a healthy rate of return on your money.

Clearly, there are many considerations available when deciding to cash out or reinvest. If you’re faced with this decision, the good news is that you jumped into the market at the low point and rode it to a healthy profit. Good for you! Successful investors look for this exact opportunity. Now, may well be the time for you to analyze whether you should cash out or reinvest for another profitable round of real estate investing.

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.

 

Home Leasing Options

Posted on by Wendy Patton

One reason I favor leasing options coaching is that these strategies give the most flexibility to complete successful deals. The three basic leasing options are the straight lease purchase option for a house you already own, the sandwich lease option, and cooperative leasing options. Besides these basic strategies, you and the other parties to the deal can write the contracts in almost anyway to create a win-win-win scenario for everyone involved. However, state real estate laws vary from state to state so make sure you understand the laws before deviating too far from the norms.

Lease Options win win

Using Straight Leasing Options to Sell Your Home

Using the straight leasing options to sell a house is my least favorite of the three strategies. Simply put, it has the highest cost and the most risk to you as an investor. This leasing options strategy involves you first taking full ownership of the house. That’s going to require a significant down payment and closing costs.

However, the straight leasing options method could be the right choice if you already own a house and want to sell for top dollar. Often it’s a good choice for landlords wanting to sell a house. He or she can use the lease with an option to purchase with the existing tenants or find other tenants interested in this choice.

Sandwich Leasing Options

The sandwich leasing option is more appropriate for investors because the costs and risks are very low. Here you find a seller willing to sell with a leasing option. You sign a leasing option that you only exercise after you find a potential buyer.

You then put that buyer under your own leasing options contract. You make sure their option fee is higher than the one you pay the seller. You also make sure the monthly rent is more than you are obligated to pay the seller. And finally, you set the selling price to the end buyer higher than what you have to pay the seller.

That keeps all of your money out of the deal and creates three paydays for you. First, when collect the higher option fee, each month when you collect more rent than you pay the seller, and in the end when collect a higher selling price than you owe the seller.

Cooperative Leasing Options

These are also known as wholesale leasing options. This leasing options strategy involves a seller, you, and a wholesale buyer. The way to begin this investing strategy is by building a list of wholesale buyers looking for lease options. Once you have a wholesale buyer list, you begin looking for leasing options opportunities. You then contract with the seller to find a buyer.

Once you have the house under contract, you market to your wholesale buyer list. Typically, a wholesale buyer will take full ownership of the house. They then find a leasing options end buyer and put it under contract. The leasing option is between the wholesale buyer and the end buyer. Your involvement in the deal ends when you sell your contract with the original seller to the wholesale buyer.

Remember, these are only the basic leasing options strategies. There are many variations to each. If you’re interested in learning more about these strategies, please use the information below to contact me.

If you want to work directly with me as your leasing options coach or with 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 leasing options, you’ll want to read this other useful information that I offer free. Please take advantage of it today.

Rent to Own Homes

Lease Option Coaching 101

Lease Option Coaching

Real Estate Investment

Rent to Own Houses – A Buyer’s Guide

Investment Property Financing Options

Rent to Own is the Way to Go

Several times each week, I make the most current real estate investing information available to readers. This time, it’s about leasing options 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.

 

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