All Forum Posts by: Shiloh Lundahl

@Adam Schneider success with a lease option doesn't always mean that the person exercises their option to buy. as I stated above, we've had a lot of people that have really appreciated that they had an option to buy the house, even though they decided to move. 

Think about it this way, let's say somebody didn't want to be a renter. They wanted more control over where they lived without worrying that a landlord would not renew their lease and they would have to find another place to live in a year or two. And let's say that they wanted more control over the customization of their house. And then let's say that they get a fantastic job offer out of state. Rather than needing 3% to 20% down to buy the house and then pay a realtor entitled company 6% to 8% to sell the house and do any of the repairs that are needed in order to sell the house, they're able to just move and not worry about the selling the house. I would say that was a success, even if they didn't exercise the option to buy.

There are intangibles that have value to some people and a lot of times having an option to buy is an intangible that has value. It's similar to when someone buys the warranty on an appliance. For some people, that warranty gives them confidence that things are going to be OK.  For other people, they wouldn't buy the warranty because if the thing breaks, they'll just buy a new one and they feel good about that. So it all depends on the person and what they value. 

@Bryant Xavier what's the best way to market to thumb production companies? I have three awesome, beautiful properties out in Costa Rica. That would be amazing for a fun production I think.

@Tom Grieshammer have you considered partnering with someone on a deal rather than doing the deal on your own? If you have available cash, then you can come in as the money partner And they can be the operator. Have you thought about that?

@Adam Schneider I wouldn't be able to give you an accurate number because of the 100 that we have done on lease options 40 of them are still in the properties and still have the opportunity to exercise their option. And I didn't keep track of every everyone who did or didn't exercise the lease option but I would say probably between a third and half have exercised the option to buy. Several of our tenants let us know that they decided to move out of state but thanked us still for being able to do the lease option program. Over the last couple of years we have had less people exercise the option because of interest rates and they are waiting for the rates to come down before they exercise the option. 

@Jay Hinrichs that’s what I’m talking about. I had an investor friend buy the house I’m living in now and he sold it to me on a lease option. It worked out great. I have a video on YouTube highlighting some people that I worked with that say how wonderful the program was for them . And those are just two out of the dozens of people that I’ve helped become homeowners. They’ve been really happy with the Lease Option program.

I wasn’t investing in the 80s or 90s or the 2000s. So I’m not familiar with the negative attitude towards lease options. In Arizona, lease options aren’t as popular as buying a home the regular way with a realtor, but they’re also not really uncommon. Similar to what you stated in your post, it’s a strategy that people may use sometimes. I just happen to like the strategy a lot so I use it all the time. And I think my favorite thing about the strategy is that I don’t have to pay realtor fees that take up a big chunk of the gain and tenant buyers can fix up the property how they like it rather than switching out things that I’ve paid retail prices for such as flooring, paint, and other things for what their preference is. 

@Chris Seveney I think that the lease option strategy may have been used poorly in the past. I started using the strategy in 2017. The way we do it is there is a lease agreement and a separate option agreement. The option fee that we charge is usually $3,900 to $5,900 depending on the purchase price. Neither the option fee nor the payments go towards the purchase. They can only exercise the option if they are occupying the property within the 3-year period of time. I do three different types of options now but the one that I started out with was a fixed option price. That option price was set at about 10% higher than the current value. So if the property was priced at $300,000, then they could buy the property at $330,000 within the three year period of time. We had many people walk into between $50,000 and $100,000 of equity over the past couple of years. 

@James Wise It seems like there may be some confirmation bias going on. I thought you were wiser than that.  

So you are stating there there is no situation in which a lease option would be a good option? 

There have been a lot of negative opinions about lease options on BiggerPockets by people that have done a lot of different types of real estate. That's confusing to me since the lease option strategy has worked out well for us and several of our tenants. It got me thinking about why somebody would choose to do a lease option. I can come up with 10 reasons why somebody would choose to do a lease option. Here they are in no particular order. Please feel free To ask any questions about these scenarios.

1. Wanting to buy now but you need to sell your house first
2. Wanting to buy now but you need to save up for a down payment
3. Willing to do work to increase the value of the house but you can still buy it for the contracted price.
4. You think the value will go up and you want to control the house with only a a little bit money.
5. Your credit is too low to qualify for a loan right now.
6. Your credit is low and you can qualify for a loan right now but you want to improve your credit score first in order to get a better interest rate.
7. You have good credit but the interest rates are still too high right now and you want to wait until the rates come down before you get a long term mortgage.
8. You just started your own company and you don’t have 2 years of tax returns so you are not very bankable right now. 
9. You want to pay off the house with big installments and you don’t want to get a loan.
10. You are not sure you want to buy but you do want the option to buy the house in case you decide that you want the house.

Hey Robin, I own three properties in Costa Rica. The properties that I own, our vacation rentals that can host large groups. Which Types of properties are you interested in?

@James Wise What can I do or say to help you see that this is a perfectly legitimate way of investing in real estate and that it can be beneficial to both the buyer and the seller?