OfflineHello! I'm new to the group. Purchased Deans "Be A Real Estate Millionaire" and have already read it from front to back. I think the last time I read a book from front to back I think was like 5 years ago. With that said I'm pretty excited about getting involved in the real estate arena. It's a little difficult where to start but I've done everything from finding foreclosures, posting ads on craigslist to get investors on my buyers list (none yet), and an ad to get motivated sellers and buyers. We'll here is my situation....I have a couple with bad credit who are interested in purchasing a home in a specific school district with the lease option, they are looking for a 3-4 Bed/2 bath, willing to pay $1000-$1250 per month and make an initial $2000-2500 down payment. Like other newbies, Im confused on where to start from here? I can't find foreclosures to fix and flip because every real estate agent are getting them before anyone gets a chance because they have a close relationship with the company that deals with BPO's (not sure what that is). I can't seem to find an agent that is willing to work with me. So im basically really getting my butt kicked out there. I refuse to give up but how can I help the couple that are looking and how do I compete with the real estate agents out there in my home area?
Sorry for the looooong post. Any advice would be greatly appreciated.
This is actually a great problem to have. All you have to do is work backwards.
How big is the area they are looking in??
Start driving the neighborhoods. You are probably looking for a sandwich lease. (This means For Sale signs and the MLS probably arent good for you though maybe it doesnt hurt to ask.)
Start calling any for rent or FSBO signs and ask if they will do a lease option. Then you just have to sign up for less than what your buyers will pay. The difference is your pay day.
The population in the area is approximately 51,000 and there are approximately 96 houses listed for sale in the area that they are looking in and the prices range from $152K - $349K. There are also about 52 properties listed for sale by owner in the area. Since the buyers are willing to put $2,000-$2,500 down, is this my pay day as well? I guess I'm a little confused when doing a lease option on a property for a buyer if its not my property.
Well, That Depends on the type of deal that you worked out with the "Original Seller". In other words, Since your doing a "Lease Option" It depends if the Homeowner Accepts a Nothing Down Lease Option from you, Understand? If He/She does then, Yes, that $2,000-$2,500 Down Money is part of your "Pay Day". There's Actually 3 parts of Lease Option that you can Profit from, #1 The Down Payment, #2 The Difference between the monthly payment that your paying, the Seller and "your" Buyer, #3 The Difference between the price that you SOLD the House for at the End of the Lease(the agreed upon future value of the property) and the price you SOLD it for.....Whheewww, know it, learn it, do it, SULLY
YOUR HERO, SULLY
Now I see how a Lease Option can be a very lucrative strategy in a down market. I guess I don't feel as bad after the agent's negative comments and lack of confidence in me. Let my success blow up in their face and show how much business they lost
Thanks guys! I really appreciate the help!!!
Regards,
July Peppers
Sully tells it like it is.and the BPO is, Broker price Option, thats where banks send an appraiser out to appraise the house. Also you can check the ads in the papers for lease options, and since you already know what your buyers are offering, then you just negotiate with the owner for less, just remember to keep the seller and the buyers apart. These are two completely separate deals.
Here's what I did. I finally found a realtor that is willing to run with me. He showed me a listing in the town the buyers were looking in. It's a 3 Bed/1.5 Bath with garage and a fairly decent size backyard for its location. The property is also registered as a historic home. It was listed at $128,900. The Buyer told my agent that if he could find someone to take it for $105K then he would sell it. They buyer was not willing to do a lease option with me because he needed the money for another investment. I'm very picky with my credit so I was able to get financing on the property and locked it up.
Now I offered the following to my buyers. A purchase price of $128,900 structured as follows.....a 2 year lease with option to buy, $5K down, and $1250 per month. $200 of the monthly payment would go towards the purchase price as a rent credit when they exercise their option to buy. They came back and said they could only afford to put down $2,500 initially and they were asking for a 3 year lease with option to buy.....no problem.....I just built the other half of the down payment into the purchase price (now its $131,400) and extended the lease to 3 years.....Problem Solved!!!
I never thought that my first home would be an investment property
Did I approach this deal right?
As long as they accept the final price of 131,400.They know the down is non-refundable, right?? You have been around for how long??? Impressive....Jan
That was awesome!
Watch for any stipulations with your loan. but, GREAT JOB!! you're almost a veteran ALREADY.
Rina
"Obstacles can slow you down, but they can only stop you with your permission." Dean Graziosi (BARM pg 101)
"For I know the plans I have for you," declares the Lord, "plans to prosper you and not to harm you, plans to give you hope and a future." Jeremiah 29:11
For a little about me, welcome to the site, and a few tips for new DG family members, click on this link: http://www.deangraziosi.com/user/3249
Yes, they were ok with the $131,400. The couple has bad credit due to medical bills. The husband is on permanent disability leave and he brings in approximately $1,800+ per month so they are going to use that to pay the monthly rent. They are aware that the down payment is nonrefundable. I told them that it will go towards the purchase price as a rent credit when the exercise their option to buy. I purchased Dean’s “Be A Real Estate Millionaire” back in November ’08. I read it within a week, I couldn’t put it down. It took me a while to take action because of one thing...Fear...but I found my "Why" in this business that motivated me to take action...my baby girl that will be due in the next couple weeks...I want to be able to give her the things I didn’t have during my childhood.
July Peppers
My cousin is a loan officer and he’s handling the loan. But from a business perspective I think I’m going to go through a mortgage broker for my future deals.
Q: What is YOUR monthly payment?
C: You can set the final purchase price to whatever you want but if it wont appraise for that in 3 years, they wont be able to get financing.
C: You can set the final purchase price to whatever you want but if it wont appraise for that in 3 years, they wont be able to get financing.
My monthly payment is approxmately $572 before PITI/ $850 after PITI. The comps in the area range from $130k-$140K.
The buyers actually just told over the weekend that they needed something cheaper, so now I have to find a property where the owner is willing to do a lease option
Hi July,
And pls bear with me I am a newbie.....
Sounds like you now have to find another home for your buyers, which I am sure you will. But as far as the concept of what you are doing (the lease with the option to buy) means that YOU are responsible for paying rent to the ORIGINAL SELLER/HOMEOWNER (who technically will still own the home), and YOU are turning around a re-letting (renting) to your BUYERS. As far as the SELLER is concerned, YOU are the renter with the option to buy at a later date and you are responsible for the monthly rent.
Firstly, am I saying this correctly and if so, does the SELLER have a say as to who lives in the house or does he know in advance that you are renting to a 3rd party.
Sorry if I am saying this wrong.......pls correct me.
Neil
C: You can set the final purchase price to whatever you want but if it wont appraise for that in 3 years, they wont be able to get financing.
My monthly payment is approxmately $572 before PITI/ $850 after PITI. The comps in the area range from $130k-$140K.
The buyers actually just told over the weekend that they needed something cheaper, so now I have to find a property where the owner is willing to do a lease option
Ack... Read the 1st paragraph and it looked like you are in the clover. But this IS a deal. Exactly what you are looking for. Maybe try to find another buyer for this one. It's a winner.