BiggerPockets

How To Do A Lease Option Assignments

Where I work in the suburbs of Cleveland, we are blessed to have good high income due to the Cleveland Hospitals. As such, there are many nice houses with no work needed in at least 30 zip codes. They range in $150K to $200K +.

FHA has changed the rules in January 2010 for home mortgages. 580 FICO and below are going to need at least 10% down.

So here is what I do every day in my Lease Purchase business.

Step 1. Go on the internet and look for 4 B 2-3 B full basement properties in good school districts, middle to upper middle class neighborhoods. Ask if they would consider getting their price if I could lease option the house. Get the appointment and show them my success stories of successful transactions. Get them to accept 24 - 36 months of market rent and no hassles. If their PITI Payment is more than market rent, ask if they could "contribute" the negative cash flow until the Tenant Buyer gets financed.

What kind of seller would contribute say $100 to $300 a month to get $900 to $1200 a month? One that has PAIN! One that wants 24-36 months of 80% - 90 % of the financial problem solved. They do not mind pitching in. Many of my sellers have had a vacancy for more than 6 months. Or they are working 2 jobs to pay for a vacant house.

Once the Property is signed up (I act as principal in the transaction, as in Wholesaling Flip), and I do a walk through VIDEO (I use a flip cam, around $100 and place it on my property website) I immediately start marketing the property.

Blitz Guerilla Marketing For Buyers....

a) Minimum of 50 hand written signs everywhere within 1/2 mile of the seller's house, same suburb, up on Fri Afternoons, down on Sun eve.:

4B 2B Rent to Own Home
Morris St.
Owner Finance
216-xxx-xxxx.

b) I go door to door or hire someone, up and down the seller's street, and sometimes around the block, give a flyer to occupant, $250 referral fee for calling in a buyer's name and cell# (only if they move in and pay us).

c) Classified ad in the major newspaper same as sign (see a).

d) emails and faxes to special contacts to find buyers

e) "tear off tab" flyers where ever there is a bulletin board, Rent To Own, we give $250 Referral Fees!

f) CraigsList (home Rent To Own), postlets, etc.

You get the picture, GUERILLA Marketing!

Usually in 2 weeks I get a buyer, and we make $5000 a house (sometimes I take a note on maybe 20% to 33% of the down payment.)

This is in and out, not a sandwich lease option.

We act as a principal in a lease option, then assign. We work with land contracts too in the same manner.

I call this "chunk cash" from non-pre-foreclosure sellers. Sellers are not behind, just want a non-traditional solution.

A.K.A. GET THIS HANDLED!

Nice people, nice houses, no rehabs, fast cash.

I love it!

Comments

• 

  Crystal Salton — about 2 years ago

  How exactly is the lease structured, What are the terms?

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  Brian Gibbons — about 2 years ago

  My lease options are structured as follows: My sellers want the house sold. FHA wants 10% down for 580 FICO and below. My tenants most of the time need time to build a stronger credit report(s). So leases generally are 12 months with extensions for good performance (rent paid on time, keep the house tidy, etc). COL increases (Cost Of Living) generally are 3.5 to 4% annually. My sellers want someone responsible and timely with payments. Crystal, I would use your state residential lease (from any property manager) and use an addendum. See an eviction lawyer. Keep the option separate. See my blog http://www.biggerpockets.com/blogs/3/blog_posts/5011-daily-blog-post-about-what-i-do-in-my-rei-business Call 216 630 0708. All the best to you, Brian PS I do not get involved w TX. They do Wraps, no CFDs or LOs.

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  Dale Russo — almost 2 years ago

  Hi Brain , Good article. Im realtor in Syracuse NY .. Looking at using lease option for seller under stress. In you article you mentioned you are principal in lease option .... Are you saying you are leaseee...and then you assing the agreed deal to the true tenant? Also if you have moment what are your thoughts on Mortgage Assignments vs Lease Option ? Looking for some start up help in this area. Thank you for your time and effort. Dale

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  Brian Gibbons — almost 2 years ago

  Hi Dale, In most states, you... Lease with and option from Seller Then Assign the Deal for a Fee to Tenant Buyer. The seller is in agreement that: You are assigning You must find a suitable Tenant Buyer in 60 days. See videos on http://BrianGibbons.biz Call me at 626 318 0599. Thanks! Brian

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  Dale Russo — almost 2 years ago

  Hello Brian, Makes sense.. I will review the videos. Are you in more of control of the negotiations assigning the deal rather then have seller sign directly to end buyer/leasee? Well Done and Thank You. Dale in Syracuse

• 

  Dale Russo — almost 2 years ago

  Good evening Brian ...Report Card Time. Busy at this end. 1. Legalwhiz .com - Lot to read here started on left side and I reading. Interesting site. What should I read or not read on this site? 2. Meet w/REI Club President - waiting on her call back ..I know her.. 3. Reviewed Your Guerilla Marketing - Have great house owner in trouble upside down will start marketing for buyers. Do you really use 50 Signs? Plus 3 short sales and 5 listings.. X number of buyers.. Regards, Dale

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  Johnny P. — over 1 year ago

  Thanks for the marketing tips

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  Shauna Brannen — 10 months ago

  Brian, the form on your website doesn't work. I am new to real estate, so new I'm shiny. I have invested in some classes but am still fuzzy on how to set up a deal once I find a motivated seller. I actually have 2 friends that need to sell and I don't know where to start. Coaching would help!

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  Brian Gibbons — 10 months ago

  If you call me I will explain the basics or read more on biggerpockets. I look forward to hearing from you! Brian See http://www.ask.com/web?l=dir&o=13734&qsrc=2873&q=biggerpockets%20gibbons