Need an agent

[Ryan B.]

I am in need of an agent.  I am pre-qualified and will be purchasing an investment property (single family home) in the Denver metro area, CO Springs or Pueblo. My focus will be renting with a lease option to purchase. Thank you

[Bill S.]

@Ryan B. my apologies. I thought you were wanting to purchase property via a lease option. Like Micki said you can likely find agents that will help you acquire property. Now to your plan. You are by your own statement a newbie to the field of lease options and have read a book that has persuaded you to delve into the field. In fair disclosure, I have never participated in a lease option, on either end. I had a friend do it on one property and he paid some big bucks to get education. His deal was a complete failure. Beyond that, I have done some learning in the area and have been approached a number of times by folks wanting to lease option my property for the purpose of releasing and optioning it. My investigation of them led me to conclude it's sort of a mini ponzi scheme IMO. 

The people I have run across in the business that are offering lease options are doing it for the following reasons. 

1) They get above market rents.

2) They get a large upfront sum of cash.

3) They usually get the property back to do the whole process again because less than 10% of lease options result in an actual purchase by the leasing party.

There are some down sides that I have also been told

1) Tenants/Optioning parties often trash the property. They buy more than they can afford and then when they realize that they take out their anger on the property. 

2) Rarely do lease options result in the sale of the property.

3) In a rapidly appreciating market (like Denver) the seller could leave significant amounts of equity on the table if the tenant can keep the deal together and actually purchase the property. 

4) If not structured properly, a lease option could be a violation of Dodd-Frank and/or respective state laws. In addition, if you are doing a number of these kinds of deals you might be construed as a lender which brings to bear all sorts of Federal regulations. There are probably ways around this but it probably requires more than is picked up from reading one book on the topic. Incidentally, I have been told that one of the objectives of Dodd-Frank was to put the rent-to-own people out of business because many folks consider it a form of predatory lending. Lease option is certainly a kissing cousin of rent-to-own.

Finally there are some folks doing this approach that seem to be flying straight and have a track record to prove it. There was a podcast here on BP with one of the people doing this in Texas. You might reach out to them to see how to do it the right way. At the same time be sure that you follow state laws as Colorado is different than Texas.

Happy investing.