Reduce Your Risk 99% Take Control Without Ownership

Career Tip #1 – If you want to make more money and at the same time, invest less of your own money, you need to learn how to take control without ownership using lease options. This business principle should be simple to understand. Exposing less of your own money in a deal reduces your risk. When you control a $250,000 property with a $1,500 lease option fee, your investment risk is less than 1%.

Why Understanding Your Risk is Important

Investing is always about Risk and Reward. The risk is how much you could potentially lose on a deal. The reward is how much you could earn on the same deal. People have a habit of talking about the reward but skipping over the risks.

Many types of investments require that you take a lot of risks to earn a small reward. Take for example investing $1,000 in the stock market to buy 10 shares of stock at $100 each. A year later, the stock went up in value $5 per share. With 10 shares, you earned $50. You risked $1,000 to earn $50. In my book, that’s a ridiculously small reward for whole a lot of risk. There are a lot of risks out there. The company that you invested in could have gone out of business and you would have lost everything. It could have been involved in a terrible scandal that caused the stock to lose 90% of its value. The entire stock market could tank in general causing the value to go down 50%. That’s a lot of risks that you have no control over for a very small reward.

Control without ownership using lease options has almost no risk but a lot of rewards. It’s common to be able to take control of a $250,000 property for a $1,500 lease option fee. That means the most you can lose is $1,500 but you have control of a $250,000 property. The big key to this is YOU HAVE CONTROL. John D. Rockefeller (widely considered the wealthiest American of all time) once stated,

“Own nothing, but control everything.”

Control without ownership using lease options uses the Value at Risk (VaR) model to calculate risk. This is a statistical measure showing your level of risk in relation to the portfolio that you control. The VaR measures the maximum potential loss with a degree of confidence for a specified period. With a sandwich lease option, the maximum potential loss is the $1,500 lease option fee. The specified period of time is the option period (usually about 18 months with a sandwich lease option).

How Control Without Ownership Using Lease Options Almost Eliminates All Risk

If you want to earn more money and at the same time invest less of your own money, you need to learn how to take control without ownership using lease options. The two methods I prefer the most are the sandwich lease option and cooperative lease option. Both are extraordinarily low risk with the cooperative lease option possibly being -0- risk. But the sandwich lease option brings more rewards.

The cooperative lease option isn’t as profitable but some of my students have taken control of a property for a few weeks or a month without even putting up any lease option fee at all. These investors use their know-how to create a bridge between the seller and the tenant-buyer. They help the seller and tenant-buyer create the lease option deal and then get out of the deal. The tenant-buyer puts up the lease option fee that becomes the funds paid to you as the cooperative lease option investor. That lease option fee coming from the tenant-buyer for a $250,000 house can easily be in the neighborhood of $12,000. That’s a very handsome reward without taking any risk!

The sandwich lease option has much more reward but does have a little more risk. This is where you put in your $1,500 investment. But you stay in the deal longer to earn the bigger reward. You still collect that large upfront lease option fee from the tenant-buyer. And you receive a portion of the rent payment every month until the sale is completed. When the sale is completed, you receive the biggest payday of all. You collect the difference between what you owe the seller and what the tenant-buyer has agreed to pay for the home. Control without ownership using lease options for a $250,000 sandwich deal can easily earn you $36,000. You didn’t risk $250,000 to earn that $36,000. You only risked $1,500!

Today’s Hot Market is Perfect for Lease Options

Across the entire country, the housing market is on fire. Would-be homeowners refuse to give up on the American dream of home ownership. According to the latest poll from PEMCO Insurance, a big majority of people who don’t currently own a home say they still aspire to. This is despite the obstacles facing younger buyers in particular.

The primary obstacles facing today’s first-time homebuyers are the down payment and loan requirements. These are the exact two things that sandwich lease option investors help tenant-buyers overcome. The lease option fee can become the biggest part of the down payment. Tenant-buyers living in the home that they will soon own is a tremendous motivator for them to save the remainder of the down payment to close the sale in 18 months or 2 years. The same amount of time that most tenant-buyers need to clean up their credit to meet the loan requirements. Sandwich lease options are ideal for these times and this market!