how do i make money on rent to own?

[Account Closed]

i still dont really understand it

[Brian Gibbons]

Okay a primer in lease options and options.

As an aside, if you are going to do a wholesale deal, you write it up as a "sale and purchase agreement" or a "straight option". You assign the deal for a fee.

Lease Options are 2 types: Lease Option Assignments where you lease and option as a principal and assign for a fee.

Sandwich Lease Options are RISKIER and don't do them if you are BROKE!. You have to pay the seller even if the tenant buyer stiffs you and damages the place! Have 3 - 4 months of rent in reserves.

Re Lease Option Assignments, there many pretty houses with little equity, or thin deals. These sellers are current with their mortgage and they want to be able to get the most amount of money out of their house without damaging their credit rating, and they don't want to do a straight rental.

It amazes me that people don't think of lease optioning and assigning the deal, and getting out of it, and making an assignment fee, like wholesaling. To me a lease option assignment (LOAs), or wholesaling lease options, or cooperative assignments, which is all the same thing, is one of the easiest and fastest ways to make money today.

It is NOW in May of 2014 a perfect storm with over 20 million houses having very little equity all of the United States. The sellers need some kind creative solution to their home sale situation.

Marketing: I look for landlords, listed houses with agents, expired listings, FSBOs, and houses that have been purchased between 2006 and 2008, at the top of the market. All these "boxes" to look into for houses that had very little equity and you can do a lease option assignment in 10 hours, make 3% with little hassles; I feel LOAs are one of the best opportunities today in most markets.

Even in a very expensive market like New York or San Francisco or Los Angeles, if you can be thin equity deal specialist, you can make 3%. 3% of $400,000 is $12K, not a bad payday.

On the buyer's side, you need to get the word out that you help people that been turned down for mortgage and still that their dream home today. You can do Meetup groups, flyers, free reports on craigslist, all sorts of things. And understand FHA and Conventonal Underwriting.

Re Dodd Frank, if it is a straight lease and pure option, and you assign it, you are generally good to go re: DF. I am still getting every TBer to a RMLO, I do not want my seller at risk down the road. It is overkill but I want to sleep at night.

In closing, when you compare this with the "needle in a haystack wholesaling", that takes 6 to 12 months with consistent direct mail marketing. I think that "subject to" and "lease option assignments" are both a lot easier and faster.

I did my first one in 1986, when interest rates were over 10%, well before many of BP nation have been born.

Hope that helps explain lease options.

Now go make 3%!