1. Lease Option Junkers
1.1. When is this needed?
1.1.1. When a house needs too much work
1.1.2. When there is not enough equity to wholesale it to an investor / rehabber
1.1.3. When the terms are good
1.2. How do you find these sellers?
1.2.1. postcards to absentee owners
1.2.2. online leads
1.2.3. other wholesalers
1.3. Example Deals
1.3.1. Hazelcrest
1.3.1.1. Link to website
1.3.1.2. Zillow Link
1.3.1.3. Seller
1.3.1.3.1. Intended to rehab and flip - numbers were bad
1.3.1.3.2. Out of town
1.3.1.3.3. Too much rehab
1.3.1.3.4. Prices plummeted
1.3.1.3.5. No demand for townhomes
1.3.1.3.6. Property Information Worksheet
1.3.1.3.7. Part of Option To Lease Option
1.3.1.4. Numbers
1.3.1.4.1. rent $395/mo
1.3.1.4.2. 100% rent credits for 3 months
1.3.1.4.3. price of home $62,000
1.3.1.4.4. $15,000 work for equity credit
1.3.1.4.5. TB actually pays $32,780 for house
1.3.1.4.6. we collected $3,000 assignment fee
1.3.1.5. Work that needed to be done
1.3.1.5.1. carpet in bedrooms
1.3.1.5.2. paint throughout
1.3.1.5.3. kitchen and bath completely remodeled
1.3.1.5.4. pass inspections
1.3.1.5.5. Comply with code
1.3.1.6. Tenant Buyers
1.3.1.6.1. husband - manager at walmart
1.3.1.6.2. wife - worked at home depot
1.3.1.6.3. would do the work themselves
1.3.1.7. Keys
1.3.1.7.1. full seller disclosure statements
1.3.1.7.2. prescreen TB's very important
1.3.1.7.3. make sure the seller is willing to inspect the property
1.3.1.7.4. make sure the TB doesn't move in until after the work is complete
1.3.1.7.5. make sure the TB pays rent during repairs
1.3.2. Charlack
1.3.2.1. video of house
1.3.2.2. see pics on computer
1.3.2.3. we had to do some work in advance - we wanted the only remaining work to be cosmetic & finishes
1.3.2.4. same as above - very generous work for equity credits
1.3.2.4.1. we offered to pay up to $4,000 for materials
1.3.2.4.2. $9,000 work for equity credit
2. Upside Down Homes
2.1. Example Deal
2.1.1. Seller bought home for $300,000 in 2006
2.1.2. Current ARV = $195,000 (lost 35%)
2.1.3. Seller Owes $250,000 ($55k upside down)
2.1.4. Mortgage is 5 years old
2.1.5. PITI $1,800 (current)
2.1.6. Market Rents = $1,800
2.1.7. Loan Balance in 10 years from now = $177,000
2.1.8. If the house only appreciates 3% per year, starting in 3 years…
2.1.9. ARV House in 10 years = $240,000
2.1.10. EQUITY = $63,000 - 25% down payment
2.2. Do longer lease option period (10 years)
2.3. Fully disclose everything to TB
2.4. Set the Option Price at the Loan Balance
2.5. Use 3rd Party to collect the rent and pay the mortgage
2.5.1. Avalon Escrow
2.5.2. (only call them if you have a deal!)
3. Properties Listed With A Realtor
3.1. Approach the deal as a BUYER
3.2. Treat it like a Sandwich Lease Option
3.3. Depending on the numbers... I may assign it, I may not
3.3.1. $400/mo net cash flow
3.3.2. $30,000 back end profit
3.4. use the more traditional wholesaling lease option paperwork
3.4.1. I sign the papers with the Seller as me being the Tenant-Buyer
3.4.2. I may assign, I may not - but I have the right to do
3.5. You don't pay the realtor, the seller does
3.6. Sample Brochure
3.7. consider sending brochure to the owners of the listed properties that are over 180 days old
3.8. John Jackson - www.LeaseOptionClasses.com
3.9. Ask the Realtor
3.9.1. "If you ever come across a seller who says "If you don't sell this house, I am going to have to rent it" - call me!
3.10. Sample Realtor Presentation
4. Seller Doesn't Want / Need / Understand a Lease Purchase
4.1. Seller Just Wants to Rent - Quick Turn Leasing
4.1.1. Quick Turn Lease
4.1.2. "OK - you don't want to Lease Purchase or sell. I understand. How would you like some additional horsepower in your marketing for a tenant? Maybe we can work together?"
4.1.3. "I have a bunch of tenants who are looking for homes in your area. You probably wouldn't be interested in letting me advertise your home, take all the calls, show the house, take the applications, pull the credit & background checks, etc, would you?"
4.1.4. "If I could find a tenant in 2-4 weeks in exchange for only one month's rent, and do all that hard work for you, what would you want to do then? Is there any reason why we coudln't do business today?"
4.1.5. they can still advertise the home on their own!
4.1.6. Option To Lease
4.1.7. Authorization to Assign
4.1.8. Assignment
4.1.9. Key - get a Realtor to market homes for you (leasing agents)
4.1.9.1. realtor is representing you
4.1.9.2. how do you find the realtors?
4.1.9.3. Craigslist ad "I am an investor, and I need an Agent to help me lease all my properties"
4.1.9.4. Start calling all the leasing agents you see in craigslist
4.1.10. numbers
4.1.10.1. average rents are $1500
4.1.10.2. pay a realtor 25% of one month's rent - $375 - $500
4.1.10.3. leave you a profit of $1000
4.1.10.4. do more marketing & direct mail?
4.1.10.5. or take your wife out to dinner
4.1.11. Tenant Check - http://www.tenantcreditchecks.com/
4.2. Seller is Afraid To Lock In A Price (prices are bouncing back)
4.2.1. Offer to lock in a minimum price
4.2.2. First: give the seller half the appreciation, the TB the other half
4.2.3. Second: get two appraisals, set the option price at the average
4.3. Seller Wants To Do Lease Purchase Themselves, Or Don't Want You To Keep Entire Option Deposit
4.3.1. "What if I can show you a way you can keep the entire option deposit?"
4.3.2. Consulting!
4.3.3. Sample Consulting Agreement