Tips for newbie doing lease options

[Sarah Bechthold]

I have no deals under my belt yet, and I find lease options (particularly sandwich lease options) the most appealing as a way to get my start. I’m also very interested in wholesaling but I’d like to get some monthly cash flow set up vs smaller chucks of cash with each deal. Would you recommend lease options as a good place to start for a newbie? How do you deal with a tenant who doesn’t pay on time or stops paying all together in lease options? Of course I would thoroughly vet any prospective tenants to avoid this happening. What type of properties should I be looking for as good lease option candidates?

I’m looking invest in Saint Paul, MN to Western WI.

[Tim Swierczek]

@Sarah Bechthold  I think lease options can be a fine way to start, provided its the correct situation.  Generally you would be master leasing a property that the current landlord does not want to manage.  Often this might be someone who would like to retire from landlording.  

One of the dangers of any lease option with a large down payment or a contract for deed (C4D) is that the owner if in trouble can stop paying the mortgage and keep collecting rent from you and you really would have no idea until it's too late, often after a year of making payments.  In that situation you have no recourse, so you would want a property that is paid in full or some form of proof the mortgage is paid each month.

Unfortuantly, you cannot know for certain if a tenant won't pay and you will need to pay the landlord even if the tenant does not,  and you need to be able to cover some if not all of the repairs so you will want some money in savings when entering into an agreement.  

@Alyssa Strom is very active in St Paul.  I'm not sure of her ability in Western WI, but I would reach out to her and have coffee with her.  You will learn a lot.