Rich Dad Education – Real Estate Blog

Dedicated to Elevating the Financial Well-Being of People from All Walks of Life

Rich Dad Education Investing Series – Lease Options: The Initial Visit

This is the sixth article in a continuing Rich Dad Education Investing Series covering the subject of lease options. In the previous article, using lease options as a way to obtain and move a property was discussed. Having numerous strategies that allow you to enter into and exit deals gives you a tremendous amount of flexibility as a real estate investor. Many Rich Dad Education students take multiple Rich Dad Education elite trainings for this very reason.

With a few exceptions, when you are a real estate investor you are going to deal with lots and lots of people. In addition to your interpersonal skills, your negotiating skills can play a large part in becoming successful in your chosen real estate investing area. While some might have a natural aptitude for negotiating, all Rich Dad Education students can become excellent negotiators with a little practice and preparation.

As was mentioned in previous Rich Dad Education Investing Series articles, you will spend a great deal of your marketing efforts attempting to attract motivated sellers. The second article in this Rich Dad Education series discussed the initial phone call and ways to screen out non-motivated sellers from motivated sellers. As your marketing efforts and hard work pay off, you will find yourself frequently visiting the homes of these prospective sellers.

Some of these motivated sellers will be attempting to sell their property while others may be attempting to rent the property. If they are attempting to rent the property, then this gives you an excellent opportunity to negotiate a lower rent than they are asking for through the lease option. The key is to be professional and prepared when you make your initial home visit.

Lease Options: The Initial Visit

Lease Options: The Initial Visit

When you find yourself in someone’s home you want to maximize the opportunity that has been presented. Over time you will develop your own routine and fine tune your presentation and negotiating skills. Until that time, here is a simple routine you can practice and make your own.

  1. Open with a pleasant hello, greet them by their name, and engage in whatever small talk you deem appropriate. This should be short and simple, but also not feel rushed. While both parties are undoubtedly eager to get down to business, a few seconds spent on courtesy and politeness can go a long way.
  2. Ask to take a tour of their home. The purpose of this tour is to inspect the condition of the home. You want to be ensured that the home is in good condition to rent. If you were using a different real estate strategy instead of lease options, then you could factor in needed repairs and calculate those repairs into your offer. You are not looking to spend money on the home while you are leasing. It is important to make sure the home is in good condition so that you can move it in quick order to another tenant/buyer.
  3. If you deem the house to be in acceptable condition, ask the owner if there is a place for you to sit down to discuss the possible terms for obtaining the property. Make sure to choose a location that allows you to talk to the owner(s) while giving you room to bring out whatever presentation materials you have at your disposal. A dining room table works wonderfully in this situation.
  4. After you sit down, ask the owner directly how much rent they were looking for per month. This will likely be a figure higher than their mortgage payment. Whatever number they give, don’t be demeaning or argumentative. Commenting that the figure seems reasonable for the neighborhood and quality of the home can go a long way to make the owner feel comfortable at these initial stages of the negotiation.
  5. At this point you will want to develop a dialogue that brings to attention the pitfalls of renting.

Motivated sellers are often simply renting it out since they have not been able to sell the property. You want to present to them a good case on why leasing to you is in their best interest. If you can succeed at this then you will have gone a long way to sealing the deal. You can fine tune this dialogue but it should include the following:

  • The average length that renters occupy a property. You want to demonstrate that their house can go through lengths where it is unoccupied.
  • It is important to explain that every time a renter moves out, and the property is unoccupied, that they lose the rent and still have to make their mortgage payment. This is an excellent opportunity to ask the owner how much their mortgage payment is.
  • You want to show the total expenses the home owner faces during unoccupied months. Include their mortgage payment, rental ads, utilities, and miscellaneous expenses. While this can be done verbally, or on a note pad, it is best to present the material in as professional of a way as possible.
  • Setting this stage now gives you the opportunity to present the homeowner with a solution. Present the homeowner a solution that would allow them to lease the property to you for a multi-year lease. This lease guarantees the owner to cover their mortgage payment for multiple years (the total amount will depend on your negotiating skills) without any of the hassle of being a landlord.

At this stage the truly ambitious and professional real estate investor could bring out presentation material that demonstrates to the homeowner that they would actually be making more money over time by leasing the property to you rather than renting it. During your initial screening call you could collect the needed information of how much they wanted in rent to help make this presentation material. If the homeowner can visually see that they will make more money by leasing it to you rather than renting, this will be a powerful visual aid in completing the deal.

Over time it will become second nature to you. but until that point, practice and prepare your presentation as you will be making it quite often as a lease option investor. Your level of success will depend on your presentation skills, how comfortable you make the homeowner, and how you handle potential objections. In the next article in this Rich Dad Education Investing Series, scenarios involving the initial visit will be further explored.


3 responses to “Rich Dad Education Investing Series – Lease Options: The Initial Visit

  1. dengxh6 June 7, 2013 at 2:30 pm


  2. Mallorca Properties June 12, 2013 at 2:12 am

    Very helpful post to those who have no or less idea about Lease Options. Just knew about some information regarding it. Great to find this blog. Great post!

  3. Pingback: Options Trading News | OptionsHouse Promo

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: