Hybrid Lease-Option Investment in Aurora, Colorado

[James Brown]

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $415,000

Contributors:
Toby Hanson

This is an example of one of our Hybrid deals with a medium term 10-year lease-option. The resident-buyer may exercise their option at any point after 1-year.

What made you interested in investing in this type of deal?

We love this model because we are helping deserving people on their path to becoming homeowners...and ideally become investors with us in the future so we can help them build wealth!

How did you find this deal and how did you negotiate it?

We worked out a partnership with the owner to take the burden of managing the property off their plate. We knew the owner through the local ICOR REIA group.

How did you finance this deal?

The original owner already owned the property and had a 30-year loan with a low interest rate in place.

How did you add value to the deal?

We helped fix up the property to get it ready for a new resident. Then we found the resident-buyer through door knocking in the neighborhood, marketing online and contacting our database of potential buyers. We screened them very and the other applicants thoroughly and required a monetary option consideration so they had some skin in the game. We set up payments and manage the property so our owner/investor partner just gets money each money without the hassles of dealing with regular renters.

What was the outcome?

They have paid on time each month and been great "homeowners-in-training".

Lessons learned? Challenges?

Make-ready took more time and money than we expected. Finding good resident-buyers with money is a challenge but we stuck with it and found a great fit. The RentRedi screening/billing platform was a complete fail and waste of our time so we have to find another.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

An agent was not necessary but I am licensed. We did work with a great lender to help screen the resident to know why they couldn't qualify for a loan and what they need to do to get a loan and cash us out in the future. I'm happy to refer to good lenders since I know many that I'd recommend.