Anyone know about this?

Question

Hey Guys, so I'm hearing more and more about lease options being a great way for a newbie to get started in real estate with no money down.  Can someone give me the skinny?  Is this legit?  What are the pitfalls and strengths?  What are the best resources to learn how to do this?  I have no home in mind to try this on, just wondering if this is worth my time investment...and financial investment to learn.

Brian Gibbons · Answer

@Brent T Galbreath

Brent where are you, what zip code?

I coach Sandwich LO, Lease Option Assignments, Master Leases, Master Lease Options on Apartments, sub2, land contracts, land trusts, private money, jv partnering and more.

No money down means not your money but you need money to do business activites, like marketing, day to day business expenses, etc.

You need to start a LLC, get an attorney for Seller Side and Buyer side contracts, pay liability insurance in case you get sued like an agent get E and O, etc.

Read my blog and my posts as I am pretty good at coaching lease options.

Go after sellers that want to sell, propose a lease purchase advantage.

Go after buyers that want to own, propose a Rent to Own Advantage.

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The Many Benefits Of Lease Purchasing

Lease Purchasing affords wonderful benefits and opportunities to sellers, buyers, investors and those who would like to operate a home-based business. Lease Purchasing allows you to control property without ownership which has benefits for all.

What Is A Lease Purchase?

A Lease Purchase is a process that combines a basic rental lease with an agreement to purchase, or with an option to purchase the property. The Buyer (or Lease-Purchaser) pays to the seller a monthly payment that usually approximates a rental amount or a typical mortgage payment on the home. A percentage of that payment is typically applied towards the purchase price. At the end of the term, the buyer has the right to purchase the property for the price and terms to which both parties have previously agreed.

Put another way, a lease purchase is essentially a rental agreement combined with a purchase contract with pre-negotiated terms. The buyer leases the property for a specific period of time and then purchases the property before the end of the lease agreement. Sales price, length of rental, rent credits, escrow instructions, etc., are all contained in the agreement.

A lease purchase is a wonderful way to control property without the headaches of banks, mortgages, taxes or immediate loan qualifying. Lease Purchasing gives you the right to buy the property, but not the obligation to buy.

Following are just some of the benefits of Lease Purchasing.

Benefits For Buyers

• Low down payment.
• Qualification restrictions are not      as great as in conventional financing.
• Past credit problems are not      usually a road block.
• The option consideration can be      fully credited to the purchase price.
• Your rent money is working for you.
• Purchase price is usually locked-in      ahead of time.
• Gives you sufficient time to check      out all the features and faults of the house.
• Time to check out the neighborhood.
• Puts you in legal control of a      property for a specified period of time.
• Time to shop for and obtain the      best financing.
• Major maintenance and repairs are      the responsibility of the owner; you take care of nothing but minor      maintenance.
• Profits, in case appreciation      occurs and you decide to sell in the future.

Benefits For Sellers

• Usually top sales price for the      property.
• Better quality tenants.
• Higher rent than usual for the      market area.
• Non-refundable option      consideration.
• All minor maintenance is delegated      to the tenant/buyer.
• Seller remains on the deed.
• Seller retains the tax shelter.
• No fees to pay.

Benefits For Investors

• Maximum leverage.
• Minimum cash outlay.
• Minimum risk.
• No maintenance.
• Wonderful cash flow.
• Excellent profit potential.

Benefits For The Business Owner

• Little start-up capital needed.
• Little or no credit needed.
• Wonderful cash flow can be generated      immediately.
• Excellent and realistic first year      income can be achieved.
• Business can be started simply, no      major equipment to buy.
• Business can be operated full time,      part time or in your spare time.

Best of all, the business can be operated from your own home office.

Todd Dexheimer · Answer

It's a great way to get involved, but will require money. Typically a seller will want at least a 5% down payment, but likely more. You also have legal fee for the contracts and title fees to look at the title to make sure it's clear.

Some pitfalls are that the seller may have a mortgage. If they do, then I make sure we control paying the mortgage and sending the seller the remaining balance.

Also, you are signing a lease, so it just takes a few weeks to be evicted if you fail to make a payment. Put language in the contract that states how that process goes.

The next would be you overall have less control and potentially limitations, as you don't have title of the property.

Great thing is that you can get creative and make a win for everyone.

Check out how I got seller financing on a 120 unit building in 2018

https://www.biggerpockets.com/member-blogs/10145/76815-seller-financed-120-unit-apartment

Brent T Galbreath · Answer

@Brian Gibbons thank you.  Love the easy breakdown you gave.  I’m living in NJ but looking to invest in FL somewhere.  Would you say there are plenty of sellers who are willing to do this or is just in unique situations?

Brent T Galbreath · Answer

@Todd Dexheimer love that article Todd.  Congratulations on the apartment complex.  That’s a lot to chew on for sure.  Thank you for your insights.