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RTO Part 2 by Zack Wiest

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RTO Part 2 by Zack Wiest

  1. 1. Selling Your Properties Via the Lease OptionTechnique, Part 2Benefits of Selling Your Properties Using the Lease Option TechniqueNon Refundable Option Deposits - This deposit is the fee you charge togive your tenant/buyer the option of purchasing the property from you at alater date for a pre determined price. The deposit should be priced atbetween 2-5% of the final sale price. This deposit should be credited to yourbuyer if they decide to exercise their option to buy the property from you.Premium Rent -When using this technique you may have the ability tocharge a slightly higher than market rent, but dont get carried away withthis. In most cases when investors charge a higher than market rent theyuse 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 amonth on a Lease Option property but give the tenant/buyer $100 a monthrent credit towards the purchase price.We DO NOT suggest doing this in some states as it has caused manysituations where the courts, should an eviction take place, view this rentcredit as the tenant/buyer having "equitable interest" in the propertytherefore creating a foreclosure situation not an eviction. You want to avoidthis at all costs so research your local laws on this matter.Premium Sale Price - The philosophy behind this is exactly the same asthe "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 nomatter 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 couldhave bought for $10,000, and renting to own properties is exactly the same.Flexible terms = premium price.Zack WiestPaDEals.com717-901-7763 Ext. 300
  2. 2. Tenants Mentality - In most cases the people you will lease to on a LeaseOption agreement have more of an owners mentality as opposed to a shortterm, "in and out in a year" tenant mentality. Also, they gave you a largenon refundable down payment on the house therefore making it moreimportant to them that they pay on time and maintain the property becausethey have more to lose than just a security deposit.Tenant Improvements - We have had several tenant/buyers over theyears finish basements, repaint, replace furnaces, install new kitchens andbaths and even add marble flooring in their homes that they are renting toown from us.Downsides of Using the Lease Option TechniquePercentage of Closed Deals - It is important to know up front that only aportion of the people you put into a Lease Option agreement will actuallybuy the property from you. In our experience about 40% of tenant/buyersactually end up purchasing the property they are in. Your closing percentagecan be increased with proper screening up front. Also, your relationship andrapport with your tenant goes a long way.Late Payments - Late payments are always an issue you need to take intoconsideration. Plan for them to happen and be prepared to deal with it, dontwait until it happens to try to figure out what to do. Set rules and guidelinesand create a system to manage your rent to owns and stick to them nomatter what.Evictions -Where you have late payments you will have evictions. Onceagain, set up a system for your Lease Option properties and work yoursystem on every one of them.Damaged Houses - When and if you deal with an eviction you run the riskof the tenant/buyer damaging your home. If this happens have a repair planin place and act quickly. Once the property is repaired you can immediatelyset it up on a Lease Option arrangement with another tenant/buyer but thistime for a larger non refundable option deposit, a higher monthly rentand a higher sale price.Zack WiestPaDEals.com717-901-7763 Ext. 300
  3. 3. Log onto PaDeals.com right now to be part of the most exciting real estateopportunity found anywhere.Zack WiestPaDEals.com717-901-7763 Ext. 300