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RTO Part 2 by Zack Wiest
1. Selling Your Properties Via the Lease Option
Technique, Part 2
Benefits of Selling Your Properties Using the Lease Option Technique
Non Refundable Option Deposits - This deposit is the fee you charge to
give your tenant/buyer the option of purchasing the property from you at a
later date for a pre determined price. The deposit should be priced at
between 2-5% of the final sale price. This deposit should be credited to your
buyer if they decide to exercise their option to buy the property from you.
Premium Rent -When using this technique you may have the ability to
charge a slightly higher than market rent, but don't get carried away with
this. In most cases when investors charge a higher than market rent they
use the mark up as a "rent credit" bonus given to their tenant/buyer.
For instance an investor who is looking for $650 a month may charge $750 a
month on a Lease Option property but give the tenant/buyer $100 a month
rent credit towards the purchase price.
We DO NOT suggest doing this in some states as it has caused many
situations where the courts, should an eviction take place, view this rent
credit as the tenant/buyer having "equitable interest" in the property
therefore creating a foreclosure situation not an eviction. You want to avoid
this at all costs so research your local laws on this matter.
Premium Sale Price - The philosophy behind this is exactly the same as
the "Buy Here, Pay Here" car lots. If you have cash, drive away today for
$10,000, but hey, we can finance it for you for $292 every two weeks no
matter what your credit. The person who opted for the financing paid
$14,000 for the same car you and I with our own financing or cash could
have bought for $10,000, and renting to own properties is exactly the same.
Flexible terms = premium price.
Zack Wiest
PaDEals.com
717-901-7763 Ext. 300
2. Tenants Mentality - In most cases the people you will lease to on a Lease
Option agreement have more of an owners mentality as opposed to a short
term, "in and out in a year" tenant mentality. Also, they gave you a large
non refundable down payment on the house therefore making it more
important to them that they pay on time and maintain the property because
they have more to lose than just a security deposit.
Tenant Improvements - We have had several tenant/buyers over the
years finish basements, repaint, replace furnaces, install new kitchens and
baths and even add marble flooring in their homes that they are renting to
own from us.
Downsides of Using the Lease Option Technique
Percentage of Closed Deals - It is important to know up front that only a
portion of the people you put into a Lease Option agreement will actually
buy the property from you. In our experience about 40% of tenant/buyers
actually end up purchasing the property they are in. Your closing percentage
can be increased with proper screening up front. Also, your relationship and
rapport with your tenant goes a long way.
Late Payments - Late payments are always an issue you need to take into
consideration. Plan for them to happen and be prepared to deal with it, don't
wait until it happens to try to figure out what to do. Set rules and guidelines
and create a system to manage your rent to owns and stick to them no
matter what.
Evictions -Where you have late payments you will have evictions. Once
again, set up a system for your Lease Option properties and work your
system on every one of them.
Damaged Houses - When and if you deal with an eviction you run the risk
of the tenant/buyer damaging your home. If this happens have a repair plan
in place and act quickly. Once the property is repaired you can immediately
set it up on a Lease Option arrangement with another tenant/buyer but this
time for a larger non refundable option deposit, a higher monthly rent
and a higher sale price.
Zack Wiest
PaDEals.com
717-901-7763 Ext. 300
3. Log onto PaDeals.com right now to be part of the most exciting real estate
opportunity found anywhere.
Zack Wiest
PaDEals.com
717-901-7763 Ext. 300