What to Do When House Prices are Depreciating?

With all the foreclosures, Rent to Own or Lease Option Selling is going to be much more popular than it was in the past 6-7 years.

If you are an Agent or a REI, here is a super idea to make money.

Let us say you find a perfect rental that most people want - 4 bedroom, 2 bath, fenced yard, good schools, good services, etc.

You want to educate the Seller that there are 4 things he-she can do:

1. Rent;

2. Sell at a steep discount (maybe) with an Agent; 

3. Sell at a steep discount (maybe) as a FSBO;

4. Hire you as a consultant to get a Tenant Buyer on a "Seller Protected Lease Option."

1. Rent - you know the drill.  Many hate landlording.

2. Agents can not promise much right now.  There is a glut of properties on the market.  Discounting 20% might do a fast sale.  Who knows?

3. FSBO?  In this crazy market?  With few getting financed?

4. Seller Protected Rent to Own is a good strategy to:

Advise the seller

• You will find a suitable Resident/Tenant-Buyer that want to own the property
• All fees will come from the Tenant 
• Seller will turn the property into an Investment Property that yeilds 10% or more
• Ideal Tenant will pay 30% more in addition to top market rent, in the fom of additional Option Payments.
• As an example, $1000 per month on a $150K house, 3% at move in or $4,500, and $300 more in tax deferred option payment.
• The agreement with the tenant buyer will be a Contract for Option to Purchase.  The Option to Purchase will ONLY BE DELIVERED TO THE TENANT AFTER THE 2 - 5 yr lease is COMPLETED.  This avoids EQUITABLE INTEREST.

The best way to be fair for the exercised price to be determined is to have 2 appraisals averaged plus 3% on the date of the exercise.  That way the mortgage will go through.

On the Tenant Buyer's Side, say....

• "This is the best time to buy because you are renting to own, not buying now, building a down payment.
• Your price will be after the "Slump" and when the mortgage industry has settled.
• You want to own in an appreciating market, not a depreciating market, so exercise your option in 3 - 5 years, with 10% down, built from your option payments, to get a good fixed mortgage rate.   With the days gone of "no money down", with this plan, you will have a minimum of 10% equity in 3 - 5 years in an appreciating market.
• If there is a family emergency, Seller will allow you "sell your option" if you must leave town.  This is for real emergencies, though.
• This is like a car lease: at the end of the lease, you can eitherwalk away and move out OR keep the house by buying the property less all the option payments paid in.

To be fair,

• a Memorandum of CFO - (Contract for Option to Purchase) should be recorded on the property at the County Records, to protect the TBer
• Seller has to agree not to add debt to the mortgage (e.g.HELOC, etc)

The Major Challenge in this LEASE PURCHASE CONSULTING is to find HIGH INCOME TERRIBLE CREDIT, LOW UNSECURED DEBT Tenant Buyers.

• A Website and Bandit signs are a must,  flyers with "take one" tabs, door hangers, etc, all going to a website. 

As you all well know, finding the houses is easy.

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