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Sellers Options Part 8: Lease Option – Move It In 30 Days With NO FEES
Joe: Hey, it’s Joe Crump. This is the last in the series of eight videos on seller options. And these are all the options that seller has if they want to sell their property. Some of them are working with you, some of them are not working with you, but typically the best options that they’ve got will be working with you if you can walk them through this process. And if not, you can help them solve their problem in a different way and that brings a lot of good energy into the world and brings good stuff back to you and to your business and will mean money for you in the long run.
Joe: You’re goal in this whole process is to look at their situation, ask them questions about it. Once you understand their situation diagnose the problem and then give them all their options that they might use in order to solve the biggest problems that they have and then let them decide what makes the most sense for them. You don’t need to twist their arm, you don’t need to make it difficult for them, you don’t need to hammer them. All you need to do is give them their options. Say, here. I can do this, I can do this, or you can do this and this without me. Which one makes the most sense for you? And the level of trust that will bring with them will make it a lot easier for them to want to work with you and do things in a way that will actually make them more money because they’re working with you.
Joe: Anyway, so this is, this last option that a seller has is to sell it on a lease option. Now, this is the one that we do most of the time if you’re doing the For Rent Method. And if you’ll understand lease options, you can start with this particular option and it’ll make possible for you to have a consistent income that comes in all the time and a real business that’s sustainable, long term. You can systematize it, you can automate it, you can outsource it and it’s a wonderful thing. And this is, the least option technique, the For Rent Method, is the technique that I teach people where they get a lease option memo signed by the seller that gives the investor, you, the right to sell that property and assign it to somebody else on a lease option.
Joe: So you go out and find a lease option buyer, you raise the price by $5,000 or $10,000 or $20,000, you collect that whatever you raised it by as a down payment which is your profit, so you’re buying it for one price, you’re raising the price, selling it for another price, taking the profit and then you’re passing that buyer onto your seller so that they now have the price that they asked for.
Joe: So, let’s say somebody asks $150K for the property and you raise the price to $160K, you get $10,000 for the down payment and you pass on that buyer for $150K to that seller. And then they start making payments to that seller. You’re out of the deal at that point. And that’s how we typically do the For Rent Method.
Joe: Now, this is how we explain, this option here, is how we explain it to the seller so that they understand all the in’s and out’s of lease options.
Joe: Sell it on a lease option to us. This is where you lease your house to a tenant and give them the option to buy at a predetermined price within a specific time period. Usually you can get full market value on the price and will get a tenant for two to three years or more. They have the right to exercise the option to buy anytime within the option period for the specific price you set. Now, the pros are, this is a quick, easy way to stop the pain of a vacant house. We’ll place a lease option buyer into the property and we charge you nothing to do this. We’re paid by the buyer. This is better than renting to a tenant because the lease option buyers see themselves as a buyer, not a tenant.
Joe: I know this may sound minor to you, but it’s not. It’s a major shift in thinking. Think of it this way. Have you ever washed a rental car? Probably not. But you do wash your own car. You take care of the things that are yours better than the things that you rent. Your tenant buyer will feel the same way. You’ll also get full market value for your property and you’ll get a buyer much, much quicker than if you sold it with an agent. We usually fill these properties within thirty days, often within a week. And you’ll get full market rent for the house. If the buyer doesn’t exercise the option, less than 33% of the people will, you’ll be building equity in the house, buying down the mortgage each month, getting a tax credit on your expenses for the house and building equity with market appreciation, hopefully.
Joe: There are very few investments that are better than owning property like this. I believe that everyone should have a house or five that they’re paying off over time. By the time you retire, it’ll give you a wonderful income to make that retirement more comfortable.
Joe: If the buyer does exercise the option, you get full market value, you don’t have to pay any real estate agent and you walk away with a nice chunk of money which you should probably use to buy another investment house. We can help with that, too, by the way.
Joe: The cons. You will get full market rent, but you will not get more than market rent. Lease option buyers are more sensitive to the monthly payment than they are to the purchase price. If you don’t price the monthly payment at or below market rent, you will not sell the house. This is the biggest mistake that sellers make and it keeps the property from selling, keeping the house vacant and the mortgage unpaid. It’s possible that tenants will default. But we screen them, we make sure they’re employed and have an income sufficient to make their payments. If they default, you must evict them like any tenant. An attorney can do this for a reasonable cost for you and then we could fill the property for you again at no charge.
Joe: Some owners are afraid that a lease option tenant will trash their property. This is unlikely. I’m not saying it doesn’t happy, it does happen sometimes. But it’s pretty rare. If they do too much damage, that’s considered vandalism and it’s a crime and it’s insured by your insurance policy. You don’t get a deposit on the property. This is not done with lease options. This makes some sellers uncomfortable.
Joe: One thing to remember, if it takes you and extra month to fill it because you won’t do it this way, and you have to make an extra mortgage payment, is that any worse than not getting a deposit? You lose a month for sure if you don’t get a tenant. But most of the time you have to give your deposit back to the tenant when they move out. So you won’t get it anyway.
Joe: If the tenant leaves and does not exercise the option, you’ll need to have the property cleaned up and get it rented again. You might also want to hire a property manager to take care of this for you and allow us to find the property buyers for you.
Joe: Analysis. This is perhaps one of the best ways to unload a property. Most of the time it becomes a profitable venture for the seller over the long run. It also keeps you from giving all your equity to third parties like agents and attorneys. We have a constantly expanding list of buyers for properties in your area and we can usually sell the property very quickly as long as we price it properly. And I’m talking about monthly payment. As soon as we get your okay, we ask that you sign a one-page lease option memo to make it legal for us to do this.
Joe: It doesn’t lock you into anything, you can cancel any time you like. But as soon as you sign it we get started, take some pictures, start the marketing and send an email and a text message to our buyers list telling them about the house. The sooner we get your go ahead, the sooner we can place a buyer, upon your approval, into your property.
Joe: So this is how we talk to people about lease options. Now, we’ve got other scripts that we use, but if you’ll understand this option for them, and this is one of the best options they can do because it actually makes them more money, it happens much faster and it’s painless for them. There’s very little that goes wrong with these types of deals.
Joe: Now, the biggest problem people have is that people don’t exercise their option, but that’s not really a problem. I mean, it makes you more money if that happens, and then you can turn around and sell it for them at a higher price after the market has appreciated, after their loan has been bought down, it’ll give them more equity. It’s a wonderful way for them to do this.
Joe: All right. So, that’s all the seller options. These eight videos that you’ve seen over the past few weeks have shown you what those are. And if you go in, if you’re using the Automarketer, you go to the Seller Questionnaire, these are all written out in the Automarketer so that you can open them up any time you’re talking to a seller and you can just read from them directly.
Joe: What I would suggest is that you listen to these videos, of you don’t have the Automarketer, you listen to these videos over and over again and listen to the words as they come out so that they become second nature to you, so they become easier for you to say, easier for you just to fall out of your mouth and that you can improvise as you go along so that you can focus on the seller’s problem and not your sales technique or what you’re trying to accomplish. If you understand what’s possible for them, you can make money on those deals.
Joe: All right. I hope that helps. Good luck. Take care.