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Category Archives: Lease Options

Finding Lease Options

Lease Options
Lease Options Can Work In Any Market at Any Time
(but not with every property)

I am one of the trainers who teaches the live 3-day Lease Options class, but many years ago I was a student.  As a student, it was important for me to take each class twice.  I wanted to double the exposure I had to all of the education that each class offered.  I also knew that the best way to learn each strategy was to take the class the first time, exercise that knowledge by doing deals in my market, and then solidify my learning by “refreshing” (taking the class again).

One day I traveled to Florida to take my “refresher” on the Lease Options class.  It was a great weekend and it gave me more respect for the power and flexibility of lease options.  During the afternoon break of the third day, I overheard two of my fellow students discussing what they had learned.  The first student was excited and asked the second student if he was going to go back home and use what he had learned in class.  The second student replied that he liked the training, however, he didn’t think it would work where he lived because of the price changes his market was experiencing.

When class was complete, I thought about that conversation for a long time.  I came to the conclusion that the second student had missed one of the big points of the training. Lease options can work in any market at any time, although not with every property.

By nature, the flexibility of lease options can allow them to be implemented in virtually any city regardless of the area’s appreciation rate (or depreciation rate).  The trick is to run the numbers for a particular property and to look at the combined effect of appreciation, net cash flow, equity position, and difference in option considerations.  Next, see if a lease option strategy is the best solution, and if it is, then design a lease option that perfectly fits the unique situation of that property.

Educated investors understand that lease options are powerful wealth building tools.

Eric Buchanan
Rich Dad Education Elite Trainer and Mentor

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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.

Rich Dad Education Investing Series – Using Lease Options with Prospective Buyers

Lease Options

This is the fifth article in a continuing Rich Dad Education Investing Series covering the subject of lease options. The area of lease options is just one of the numerous trainings offered by Rich Dad Education. Through these elite trainings, Rich Dad Education students are given the ability to transfer their knowledge as quickly and as profitably as possible to the real world. With this goal in mind, Rich Dad Education trainings are designed to teach students relevant strategies and to also give students a blueprint on how to implement these strategies from the moment they leave the classroom.

Becoming financially successful using the lease option strategy involves far more than simply learning what lease options are and how they work. Successful real estate investors that use lease options are also successful at marketing, interacting with people, and in understanding their local markets. These are just a few additional skills that are needed in order to reach your full potential as an investor who chooses lease options as an investment mechanism. While these skills aid your success in the realm of lease options, they also help the Rich Dad Education student in their journey to become successful at other real estate investing strategies.

Using Lease Options with Prospective Buyers

In a previous article in this Rich Dad Education Investing Series, the subject of motivated sellers was discussed.  Motivated sellers are classified as sellers who need to sell their home because of various circumstances that arise in their life. As a lease option investor, you can provide motivated sellers real solutions to real-life problems.  For example, a motivated seller might have to move out of state. After listing their house with a Realtor for a long period of time, their home might still remain unsold. As time is ticking down the seller of the home might be faced with a situation where they feel they have to:

  1. Drastically cut the price to move the home or;
  2. Attempt to rent it out and manage the rental from out of state.

Neither of these options are going to be enticing for an individual who wants to move onto the next stage of their life. As a lease options investor you have the ability to step into this situation and offer the homeowner a better solution. You can step in and offer to lease the home for five years and agree to take on maintenance and repairs for the home. You also agree that during any point in this five-year window you have the option to purchase the home at an agreed upon purchase price. Let’s say that the homeowner’s monthly mortgage payments are approximately $1,500 and the home has a value of roughly $200,000. Let’s say you offer to make their monthly payments of $1,500 and agree that if you exercise the option to purchase the home, you will pay the owner the $200,000 they are asking for. Providing a motivated seller a way to get out of their problem is going to catch their attention. If you have to get the deal done with an owner that is on the fence, then some level of up-front money will likely seal the deal.

Each real estate investor brings with them different levels of negotiating skills. Depending on your negotiating skills you might be able to negotiate lower monthly payments, a lower lease option price, and no up-front money in the deal. With good negotiating skills you can still leave the owner happy to do the deal as you are providing them a real solution to their problem while pocketing a little extra for yourself.

Now that you have successfully completed a lease options deal you can turn around and use the power of lease options to lease the home to a prospective buyer! Just as some individuals find themselves in situations where they are motivated to sell, others find themselves in situations where they want to own a home but have circumstances that are providing roadblocks to obtaining a traditional loan. Through your marketing efforts, you can attract these individuals in similar manners that you attract motivated sellers. Individuals that want to own their own home are easy to find through simple marketing efforts.

For individuals who want to own a home but cannot obtain traditional financing, the prospects of leasing to own is going to be very intriguing. There are a couple of key things you need to do in setting up the parameters of the lease with these new buyers:

1) When setting the time of length of the new buyers lease, you always want to make it a shorter lease compared to the amount of time you originally leased the home. For example, if you agreed to a five-year lease with the motivated seller, you will want to target a two- or three-year lease with the new buyers.

2)  The amount you charge for rent on the monthly lease should naturally be higher than the amount you agreed upon with the motivated seller. Your knowledge of the local area will be valuable in helping to determine what you can charge for the monthly lease. In negotiations, don’t hesitate to ask for a premium on what the average rent is as you are giving them the ability to own the home.

3) In negotiating what price the new buyers can purchase the property for during the time of the lease, calculate what the home should be worth at the end of the lease. If homes in the neighborhood have been appreciating at 5%, then make the appropriate determination on what you should ask for the new buyers to exercise their option.

4) Be sure to ask for an up-front down payment. This up-front down payment can be deducted from the price of the home should the buyers exercise their lease option, but is not-refundable if they do not.

In using lease options to purchase and to sell a home, real estate investors can find themselves doing deals where they put little to none of their own money into a deal and still make substantial rewards.  In the next Rich Dad Education Investing Series article we will look deeper into the negotiating process with motivated sellers and prospective buyers and give examples and tips on how to maximize your profit when negotiating with both parties.

Rich Dad Education Investing Series – Lease Options: Adding a Personal Touch

Lease Option Strategies

Lease Options: Adding a Personal Touch

This is the fourth article in a continuing Rich Dad Education investing series covering the subject of lease options. The elite training covering lease options is just one of the numerous elite trainings offered by Rich Dad Education. This Rich Dad Education elite training on lease options goes far beyond just teaching a strategy that can be used in various market conditions. This elite training also teaches skills that are widely used in all aspects of real estate investing. The last article in this Rich Dad Education investing series focused on one of these skills: marketing to prospective buyers and sellers of properties. This article will focus on developing necessary interpersonal skills when you interact with these prospective buyers and sellers.

While there are a few real estate investing strategies that don’t require extensive interaction with human beings (i.e. tax liens), for the most part real estate is a people business. If you don’t like people then real estate probably isn’t for you, as you will deal with people at almost every stage of the investing process. In these interactions your interpersonal skills can be a tremendous resource or a crippling liability. It is up to you to take the time to refine these skills so they do not have a negative impact on your bottom line.

Here are a few tips and techniques when dealing with potential buyers and sellers:

Listen – With lease options, you are helping an individual or family with a real-world problem find a real-world solution. Sometimes your solutions will fit their needs and sometimes they will not. You should always be attentive and polite as they are describing their circumstances. Aside from common courtesy and building trust, this attentiveness will give you valuable information in helping you determine if the lease option is the right strategy for the circumstance. If you are unclear about a particular point, ask them additional questions until you have a clear picture. It is far better to ask for a little clarification then for the prospective seller or buyer to sense that you don’t understand or care about their circumstances.

Patience – The vast majority of the people you come into contact with will have no familiarity with the concept of lease options. They undoubtedly will have numerous questions about the subject and will likely need you to explain the same point numerous times.  Put yourself in their shoes and be patient as you walk them through the process. Buying or selling a home is a major event in one’s life that can be very stressful. If they do not understand and feel comfortable with the lease option strategy, then it is unlikely that they will proceed any further.

The Little Things – It is amazing the impact that a genuine smile, a courteous hello, maintaining eye contact, and remembering a person’s name can have. It is very easy for the novice real estate investor to want to dive right into the nuts and bolts of gathering information and presenting solutions. The simple pleasantries often only take a few seconds of your time (and taking a few notes for those with less than stellar memories) and can have a lasting impression.

Learn to Deal with No – Nobody likes to hear the word no and it becomes increasingly disheartening the closer you get to finalizing a deal. Sometimes you will get a resounding no right from the start. This is easy to deal with as you simply politely thank them for their time and move onto the next prospective deal. Often times you get a no simply because the prospective buyer or seller are confused, unsure, or think that they can get a better deal down the line. There are several techniques that will be discussed in an upcoming Rich Dad Education article that will help you get to the cause of the no and provide potential solutions that will turn that no into a yes. In the end, the most important thing is not to burn any bridges when you hear the word no as you should stay polite and professional in all of your dealings.

Be Yourself – Unless you are the world’s most cynical sarcastic individual, it best to refine your interpersonal skills within your own personality. Most people can sense if you are being disingenuous and if you genuinely opening yourself up to others you might connect on a level that builds real trust.

Working on your interpersonal skills is a crucial part of real estate investing, and lease options in particular, as it can build trust and familiarity with prospective buyers and sellers. Aside from the bottom line effects, it will also make the entire investing process more pleasant as you will come to enjoy the vast majority on interactions with others. Refining these interpersonal traits oftentimes simply requires conscious thought, a little practice, and an occasional reminder to yourself to treat others as you want to be treated. The rewards can be long lasting on many levels.

Rich Dad Education Investing Series – Lease Option Marketing

Lease Options Marketing

Lease Options Marketing

This is the third article in a continuing Rich Dad Education investing series covering the subject of lease options. Lease options is one of the most popular elite trainings offered by Rich Dad Education as it is a strategy that can be used in various market conditions regardless of the current amount of capital students are starting off with. Lease options can be a Rich Dad Education student’s go-to strategy or used as one of many successful strategies depending on market conditions and the specific opportunities that are presented to Rich Dad Education students.

Up to this point in this Rich Dad Education series, the following items have been discussed:

  1. Why lease options provide an exciting alternative for Rich Dad Education students to traditional investing approaches.
  2. How motivated sellers are an important part of the lease options process as various circumstances of life can create opportunities for Rich Dad Education students to provide win-win situations for both parties.
  3. Defining and explaining the lease and option portions of the lease option process.

As the last article in this Rich Dad Education series discussed, the lease option strategy allows real estate investors the right to buy a property without having the obligation to do so. This strategy can be a highly profitable strategy for the real estate investor while also providing real solutions to the problems of a motivated seller. The popularity of this strategy among Rich Dad Education students is enhanced by the fact that you can provide these solutions to motivated sellers with using little or none of your investing capital to do so.

One obstacle that many new real estate investors run across is locating motivated sellers. The concept of motivated sellers excites new real estate investors, but once the process of locating them starts it can create a level of frustration in new real estate investors that can lead to inaction. While you can (and should) make inquiries on homes for sale in your target neighborhoods to determine if the sellers are properly motivated or not, there are many marketing techniques that you can utilize to grow your burgeoning real estate business and get those motivated sellers to contact you.

Creating a solid marketing plan will not only help find motivated sellers, but also help in nearly every aspect of your real estate business. Regardless of whether or not you choose to use lease options as one of your core real estate strategies, creating a marketing plan should be one of the first things you do as a new real estate investor. The ramifications will be long reaching and can yield tremendous results.

Real Estate Marketing Techniques

Most new real estate investors have little experience in marketing a product. Because of this fact, many simply never attempt to market their real estate business and many others that attempt to do so don’t do it effectively. Here are a few simple techniques that can be utilized to help attract motivated sellers, and many others, to your real estate business.

Car Magnets – While some might squirm at the thought of making their car a rolling billboard, this can be a cost-effective means of attracting people to your business. Car magnets can add a level of credibility when you meet with prospective sellers and buyers in your target neighborhoods. The key with car magnets is simplicity as you don’t want it to be difficult to read. An effective car magnet might read, “We buy houses, cash or terms” followed by a telephone number that is easy to read.

Newspaper Ads – A traditional means of marketing, many savvy investors target ads in publications that cater to community papers and shopper publications that target specific areas the real estate investor is interested in. When using newspaper ads with lease options in mind, you want to use simple phrases that can help reach motivated sellers. For example:

  • I’ll buy or lease your house or tell you why no one else will. Call…
  • Do you own an unwanted home? Free Consultation. Call…
  • Immediate Debt Relief! I will buy your home. Call…
  • Behind on Payments? Need Immediate Help? Call today for a free consultation.
  • Free consultation on how to sell your home in three days or less. Call…

Website – A simple yet professional website can add a tremendous amount of credibility to your business. You can use your website address on business cards you hand out, in newspaper ads, or reference it when making calls to prospective sellers. Simply having a website can often resonate that you are a professional to those buyers and sellers you are dealing with. Be sure to include various ways people can get in touch with you, including phone numbers and an email address.

Social Media and Networking – An upcoming Rich Dad Education series will cover these topics in depth but it goes without saying that in today’s information age you should take every opportunity possible to promote your business.

Signs – Real estate investor signs are becoming increasingly common. What often differentiates the use of signs is how professional they look. Many signs and bullet board material often appear shabby and unprofessional. When creating a sign, ask yourself a simple question, “Would I want to do business with this person?” An “I Buy Houses” or “Stop Foreclosures Now” sign can attract motivated sellers. If the sign is professionally done it will have a larger impact.

These are just a few of many techniques you can use to attract motivated sellers to you. While there are many expensive methods of marketing your business, these are just a few cheaper alternatives that can get the ball rolling. All it takes is attracting one motivated seller to complete a deal to make all the effort worth it.

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