Owners who don't read this page often lose 1-3 mortgage payments!
How does a lease/option work?A buyer/tenant will pay a premium to purchase your home later.
The money they put down aka OPTION FEE and a RENT CREDIT is converted to a down payment at the end of the lease. Purchase agreements come in 2 flavors:
Appraised Value
This is the average of similar properties determined by a licensed real estate appraiser at the end of the lease.The benefit with this method is that the property will be purchased at a fair value. The disadvantage of course is that the property could dramatically decrease.
Set Price
A price agreed by you and my buyer/tenant. The benefit with this method is that you will have peace of mind as to what the price will be at the end of the lease.
What are the benefits to a lease/option?You will probably make more money.
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. Generally, you will receive about 1% up front and anywhere from a $200 - $500 premium over rent.
How long is the lease?Most buyer/tenants want a 2 year lease.
Buyer/tenants want about a 2 year lease/option. However, that's most and not all. I will bring you an opportunity about every 3 weeks.
What do you get out of this?Half the Option Fee which is determined by you.
The option fee is a non-refundable amount of money required to secure a purchase agreement. The option fee will be split evenly between us. The option fee is determined by you. Market conditions currently support an option fee between 1% and 2% of the current estimated value of your property.
There are really no background checks? That is correct. Money talks.
My partners and I have discovered that folks who put a bunch of money down with the intention of purchasing a home make better tenants. There are no exceptions to this rule. Here are the 5 reasons why no questions are asked:
1
Anyone interested in doing a lease/option has bad credit. If they had good credit they wouldn't need to do a lease/option.
2
I have a huge crowd of people eyeballing my properties because they have money and want to move fast.
3
Folks who put down 2% and pay $300-$500 over market rent generally don't want to lose their investment.
4
80% of the lease/option candidates are moving from out of state and don't have a background to check.
5
Having managed properties for over 20 years, I have learned that money talks and background checks are often useless.
What is the downside to a lease/option? You could lose money.
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. Anyone who can promise you a profit is pulling your leg.
Will there be pets and/or smokers?Probably.
This person will be buying your home. If you have problems with this - STOP - we are done. The only exception to this rule is condo/townhouse restrictions. If your property has restrictions, let me know now so we can save everyone a bunch of time.
Can I decide who the contract is assigned to?No.
Most sellers/partners think they can predict the behavior of a buyer/tenant based on their profession or background. They had a bad experience with a renter and think they can use the same principles for a lease/option. Statistically, a buyer/tenant who puts down a huge chunk of money down and pays a premium per month is better than a straight renter. Having done both for over 20 years I can tell you that I will take a lease/option tenant I have never met over a renter who has had stellar references any day of the week.
Can I still market my property at the same time?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.The biggest mistake you can make is renting your property without telling me. A simple phone call or email is fine - I don't take it personally.
How long is the lease?On average about 2 years.
However, some buyer/tenants have unique situations that call for more or less. The period is agreed upon in advance.
Are there any hidden fees?No.
I only make money if I can assign your contract. My buyer/tenants are the ones purchasing the assignment.
Why is your system so effective? I network with all the lease/option guerillas.
I have been doing this for years and we have marketing down to a science. I'm not the only one trying to move your property. It will not be unusual for a competitor that I trust call you and negotiate a deal.
Is today's estimated value important in a lease/option? No
Today's value has nothing to do with a lease/option contract. The only purpose of putting today's "Estimated Value" is to provide potential buyer/tenants a frame of reference. It is not the price they will purchase your property. Inflating this value works against you so don't call me and complain about it.
Can I stop using your services at any time?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.
Can I read your contract?PLEASE!!!
Download here. Every month some newbie investor wastes my time because they really didn't read this page or my contracts. You can save yourself 2 mortgage payments if you read it now. Give it your lawyer, accountant, real estate agent, mortgage broker and anyone else you feel necessary to have it blessed with.
Can tenants be evicted easily for non-payment? Yes.
Tenants are evicted every month for non-payment. One of the benefits of Nevada is that eviction processes favor land owners. Tenant/buyers are warned in advance that there is no mercy and that they will lose all their money if payments are not made on time.
What are my responsibilities during this process? Stay in touch.
EMAIL
This is my primary method for communication. I use email to discuss "non-urgent" issues related to your property. If you don't check your email on a regular basis, we will have problems.
PHONE
I will only call you if I have a deal or something "urgent" to discuss. I don't call you to chit chat about the weather. If you take more than 2 business days to return a call, we're done.
Vacation?
No problem. Just let me know when you will return. I don't care where or why, just shoot me an email on your return. Why is this so difficult for some people?
What are my responsibilities after the contract is assigned? Pay the mortgage.
You will be required to show proof every month that the mortgage is being paid. Some of my buyer/tenants will insist on payments be made through escrow. If you attempt to defraud me or my buyer/tenant, bad things will happen to you.
What happens if repairs are necessary during the lease? The tenant is responsible for the first $500.
There is a 30 day grace period after a tenant moves in. After that 30 days, your tenants are responsible for the first $500 in repairs. If something greater than $500 crops up, you are on the hook to get it repaired in a rapid fashion. If you don't have a clue who to turn to, call me and I will refer you to one of my preferred vendors.
How does the move in process work? You insure everything is in working order.
Most buyer/tenants don't have the luxury of doing a walk-through prior to moving in. If your utilities are not on, my buyer/tenants don't have the opportunity to confirm that the appliances or A/C is working properly. Standard procedure is to give them 30 days to make sure everything is working properly. If there are problems, you will be required to fix them and/or compromise to bring the property up to specifications. After the first 30 days, your tenant/buyers will pay the first $500 in repairs.
Do you really help buyer/tenants? 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.
Should my tenant/buyers purchase renters insurance? Doesn't matter.
Insisting that your tenant/buyers purchase renters insurance is just a battle you don't need to fight. The only benefit to you is that it covers your appliances. Since you followed my advice and only purchased used appliances, who cares? Do you really want to kill a deal over a $150 dishwasher?
Who receives the monthly payments? You do.
Once the contract is assigned, you receive all the monthly payments. I don't take anything else.
Must payments go through an escrow account? No.
However, an occasional buyer/tenant will insist on it. The lease/option business is riddled with owners who take money and then stop paying the mortgage. Only a few buyer/tenants insist on this approach because just one late payment will destroy a purchase agreement.
How can I avoid losing money in this process? Read Mistakes & Tips.
If you really want to be on top of your game. Read these 2 pages. I have found that owners/partners who read these pages don't lose money.
Read this if you want to laugh at other people and avoid similar mistakes.
What are the chances of a buyer/tenant succeeding in the purchase?Less than 10%
That's right. I saved the best for last. Most lease/option tenants don't make it:
50% give up...
About month number six they realize that owning a home is way more than meets the eye. Since they decided that they needed the same lifestyle they had before, they stretch themselves into a house they can barely afford. All it takes is one little hiccup and their world collapses. "I lost my job, my loser boyfriend gambled all the money, my kid got sick, my car broke down..." I get a country and western song every week. 80% of the people I evict are single women.
20% of them extend the contract because...
They dilly dally and never get their credit cleaned up...
20% of them will not make it because...
They ignored my warning and got into a home they could never afford...
10% of them will make it because...
They followed my advice:
1
They started modestly in a home.
2
They hired a professional credit cleaner.
3
They didn't tell their boss to piss off.
4
They saved their pennies for a rainy day.
5
They avoided the new car lots and jet skis.
7
They frequently chatted with my mortgage broker.
8
They didn't wait until the month the lease expired.
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My specialty is lease/options.
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My buyer/tenants want to own your home.
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You can still market your property.
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You have nothing to lose by using my services.
Mistakes
Owners & partners who really want to avoid major mistakes want to read this page.
Tips
Owners & partners who want to save money read this page.
Lease/Option Process
I have about 500 prospects interested in a lease/option because they cannot qualify to purchase a home. Your property will move in about 4 weeks if you follow my advice and post option fees and monthly amounts at or just below market. Click on a menu bar below to see a full explanation.
1 - You Provide Access
If you live in town, we will meet at the property to review the process and discuss potential terms. If you don't live in town, you will mail me your keys or put me in touch with someone who does. You are welcome to contact my references if you want to feel better about giving me access. Your property will not be marketed without a lock box.
2 - You Approve Advertising
I will post your property on my website along with potential terms. Once you have blessed the advertisement your property will become active on my site and competitors I network with.
3 - Your Property Is Shown
I network with all the lease/option specialists in Las Vegas. There is a good chance that one of my competitors will contact you with a potential lease/option candidate. Who ever brings a deal first gets the cheese.
4 - You Agree To Terms
You may elect to turn down an opportunity or negotiate different terms. The biggest mistake you can make at this point is to become indecisive or go missing. This is where most partners/owners make a mistake.Read this page if you want to avoid a similar fate.
5 - You Sign, Fax & Receive Money
Once you have faxed the contracts back, I will collect your money. No money is collected or keys distributed until you have faxed your signature back.
Here is a sample contract.
