A Simple Process To Sell Your
Houses Fast In Today's Troubled Market
By Sean Flanagan
The author has permitted the reprinting and redistribution of this
article.
So you've gotten into the real estate market. You found a motivated
seller who was really feeling a financial pinch brought on by the
economic crisis. They reached the conclusion that their chances of
saving their home was next to zero, so they chose to take the
consolation prize to walk away under their own terms with their pride
intact and their credit report in better shape than they expected.
Because of your Real Estate investing education you were able to
purchase their property with a subject to transaction. Knowing the
smart money was on purchasing their property through a land trust, now
you're ready for the next step – finding a buyer in today's
market. The chances of quickly flipping the property for a profit are
relatively low, so what can you do – short of renting it out
and playing landlord
Let me give you a better option.
What if I told you that instead of simply renting the property out for
market rent you could find a tenant who might want to buy the property
in the future for much more than it's worth now, is willing to give you
a substantial “down payment”, will pay a premium
rental rate, and will agree to pick up most of the maintenance expenses
I don't need to pinch you; you're not dreaming.
Instead, I need to explain how you can step into a real estate
investing goldmine. I'm referring to the lease option strategy to real
estate riches.
The lease option is two agreements, although a lot of novice investors
think it's just one. The first part is a standard rental agreement,
while the second part is an option agreement.
The rental agreement lays out the terms of the rental – how
much they'll pay each month for the privilege of living in your house.
You'll also spell out all of your rules, explain their deposit, etc.
It's a simple agreement. Even though you're a Real Estate investor who
may just be starting down your personal pathway to prosperity, you've
probably seen one of these agreements even if only as a tenant.
Where this Real Estate investing strategy becomes a work of art,
though, is by incorporating a second agreement into the transaction the
option agreement. Don't be afraid of the lease option – it's
not scary. You don't need to spend thousands of dollars on a worthless
piece of paper that says “Bachelor's Degree” to
understand lease options; in fact, you'll spend less time
overcomplicating the concept if you don't have one. Here's how it works
- Your tenant-buyer pays you an option consideration fee (generically
referred to by some people as a “down payment”).
The amount is based on your comfort level – and your
tenant-buyer's ability to pay, but is generally between $2,000-$10,000.
This money will be credited back to the tenant-buyer when they finally
decide to purchase the property. If for some reason they decide to walk
away from the agreement or can't complete the purchase within the
alloted time, they'll lose this fee.
- In exchange for the option fee, the tenant will have the right to buy
the property for the amount that you negotiate before they move in.
This price is always more than the property is worth today, which
guarantees you a nice profit margin when they exercise their option.
They'll have a fixed amount of time – usually 12-36 months to
exercise that option.
- For every on-time rental payment for the term of the agreement,
you'll grant them a rental credit that will also be deducted from their
closing costs when they exercise their option.
- Because a lease option is further up the real estate food chain then
a simple landlord-tenant relationship, the tenantbuyer will often agree
to pay all maintenance expenses less than a certain dollar amount.
Anything more than that you'll pay. What this does is help guarantee
they'll be proactive in letting you know about problems quickly and it
gets you out of midnight plunger patrol calls for clogged toilets.
When the tenant buyer decides to pull the trigger and exercise their
option they'll receive credit for the option consideration fee and any
rental credits they've earned along the way. If you agreed to a
purchase price of $175,000 and the tenant gave you an option fee of
$10,000 and they were to pay $1,500 per month with a rent credit $500
per month for three years, they would only need to bring $147,000 to
the closing table.
The lease option is a tremendous tool for you to use in establishing
yourself as a real estate investor, but it gives you another benefit
you can't easily put a price tag on It gives your tenant the pride of
ownership. They have money tied up in their house, so they're going to
be much more willing to pay their rent on time and prevent damage from
taking place.
Recent market changes have shaken up the way the lease option works.
Knowing this will keep you from making a mistake that could potentially
strike a devastating blow to your transaction lenders have added what
are called “seasoning rules” to real estate
transactions. All this means is that they're stating how long they want
the house owned by a party before they'll approve a loan on that
property. This is generally 12 months; since most tenant buyers won't
exercise their option within the first 12 months anyway, it's a moot
point. However, since you've purchased the property yourself with a
subject to transaction and you placed the property in a land trust,
you're covered regardless.
So get your real estate investing career off on the right foot by using
the lease option in conjunction with a subject to transaction to
quickly shove yourself down the pathway towards prosperity. You're
gaining a valuable education in real estate; take your profits and
invest them in your future by buying even more property creatively. The
real estate world is your oyster; let your profit potential increase
your drive to prosper in 2009!
Sean Flanagan went from dead broke, living off Ramen Noodles and
selling used pallets from the roadside for $20 a day, to a self made
real estate multimillionaire in under 2 years time.He has a FREE audio
course which you can get right now by quickly visiting
httpwww.yuckyhouseleads.com . He also gives away a coaching program for
new real estate investors at httpwww.yuckyhousesystems.com
If
you would like to take advantage of the market and learn how to invest
in real estate and you are local to the Dallas Fort Worth area, I know
a really great teacher and mentor here in Arlington Texas. Please take
a look at his web site: DennisJHenson.com,
Dennis has a great Mentoring and training program, I know because I am
one of his former students. I learned a lot from his one on one
teaching technique. - Michael Harman 817-457-7572
mchfun.business@gmail.com
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