Quote: "The only thing that walks back from the tomb with the mourners and refuses to be buried is the character of a man. This is true. What a man is survives him. It can never be buried." - JR Miller
Ethics is the most important element in this business. If we don't have ethics and operate with the highest integrity, shame on us! As investors, we need to hold ourselves to the highest standards possible. I take ethics and integrity very seriously.
Important Issues of Integrity, Always treat your sellers and buyers like valuable clients and customers. You are here to serve them, not them serve you. Their needs are the more important than yours., We must be willing to take responsibility and be held accountable for our actions. We must keep our word., We need to be honest and up front with every party involved on every transaction. Practice the Golden Rule, Make sure the seller knows if they will be able to buy another house or not after they lease purchase, We must do everything we can to make sure the tenant-buyers and sellers are set up for success, Never put a tenant-buyer in a house you know has no realistic chance of getting a mortgage in 1-2 years, Allow the tenant-buyer to get a 12 month extension if they can't get their credit fixed in time. The rent will go up, the price of the home will go up, and they will be required to put down an additional deposit., Make sure the seller is not behind on payments & the Title is clear, We must fully disclose everything to your sellers and tenant-buyers., Never put a tenant-buyer in a seller's house that you wouldn't put it yours., Work with, not against, Realtors. Don't ever try to "steal" their listings, or trash talk them. And don't ever pretend to be a Realtor!, When explaining this business to people, keep it simple. Don't complicate things., Pay people on time!, Keep the lines of communication open between you and your clients. Return your calls. Be accessible.
Stick to Basics
1) Find a seller
2) Find a buyer
3) Collect cash
This is a people business. It's all about relationships & keeping things personal.
Not doing enough marketing
Not knowing how to talk to Sellers
Important Keys to Effective Marketing, Just Do It, CONSISTENCY - It's so important in this game. You have to stick with it. Don't quit after a few postcards or a few calls and say it doesn't work in your market. And once you find something that works, stick with it! Don't slow it down!, Get someone else to do it for you, Done for you, in spite of you, You can hire your own VA at www.oDesk.com, If you want to hire a full-time VA, go to www.VirtualStaffFinder.com, Selling is an ART and a SCIENCE. Be a student of sales., Seriously recommend "The GUTS Sales Method" ebook by Claude Diamond., "Getting to Yes" book, Be accessible, Return calls IMMEDIATELY, Practice, practice, practice, record your calls in Skype, Role play with friends, Get a coach
Can You Wholesale Lease Options Without A License? It actually depends... In some States, you definitely need a license. In some States, maybe you do, maybe you don"t? In still other States, it doesn’t matter. Some say that having a property under an Option Contract gives you "equitible interest" in a property, and makes you a "Principal" - therefore giving you the legal right to assign your interest in that contract to someone else. The fact of the matter is, this is sometimes a grey area, and often open for debate. I am not even going to attempt to give you legal advice. You really need to seek the advice of a competent real estate attorney who understands creative real estate investing. (And, you should investigate for yourself what your State requires. It"s on-line. Go read it!) I actually do recommend that you get your Realtor’s license. In most States, it is very easy and affordable to do so. There are many benefits to obtaining your license. And I actually believe these benefits outweigh the costs. You could argue that we are “principals” in these Lease Options, we have “equitable interest” in these properties, and that we are just “assigning our interest” to someone else – and you may be correct. But in reality, it doesn’t matter what you *think* is right. What matters is what the law says & how your local Real Estate Commission interprets it. Therefore, it is critically important that you review your State’s requirements and talk to a local attorney who understands creative real estate investing. But what if you don’t want to get your license? Can you still do these deals? YES!! Listen very carefully – you can still do these deals and make a ton of great money – if you do them properly! I recommend that you do one of two things if you don’t want to get your license: 1) Hire a Realtor to market and advertise your homes for you. Marketing your homes is one of the first things you should outsource anyway. So why not hire a Realtor? 2) Stay in the middle. When you get a property under a lease option contract, don’t assign it. Stay in the middle and sub-lease the property – as if it were your own investment property (just like a “Sandwich Lease Option”). In both cases, talk to a local lawyer who “gets it” to make sure it works in your state. In summary – I recommend that you review your State’s laws for yourself, and talk to a competent attorney who understands creative real estate investing. These deals are some of the easiest deals in the world to do and can be very profitable – if done correctly. Do your own due diligence & investigate what the requirements are in your State – and everything will be fine. Here’s to your success! Happy investing! - Joe McCall
1) Marketing, marketing, marketing…for motivated sellers.
2) Talk to the seller, find out what their needs really are, find out how you can help them
3) Send the Seller "Short Offer Form"
4) Start marketing the home
5) Find a tenant-buyer & pre-qualify them.
6) Fill out the empty form docs & send to Escrow Company
7) Escrow Company collects the Option Consideration & rent, and disburses the funds
8) Assign the Lease Option to Tenant Buyer
9) You get the Option Consideration as your Assignment Fee
10) Make sure the TB is in a credit repair program & working with your mortgage broker
11) Rinse and repeat! Do it again.
How the numbers work (when presenting this to sellers), Spreadsheet, Video on Spreadsheet
Why do you need a marketing plan?, We are not in the "real estate business", You need to know where you're going, Are your goals realistic?, You want to make $100,000/mo, but are you willing to do what it takes to make it happen?, What do you really need to have a successful business and live a life of "stress free abundance"?, PPPPPP, Prior planning prevents piss poor performance, You need a plan to hold you accountable
What's Your Criteria?, You need to know your market, What kind of seller should you target, Where's the demand?, Market Research, Buying Criteria, What sells a Lease Option Home?, Location, location, location, Lots of marketing - craigslist and bandit signs - videos and pictures, Affordable rent, Nice home in nice neighborhood, Generous Rent Credits, Having a Buyer's List, Keep this important thing in mind: You can only sell homes people want to buy., Stay in the median price range. This is where most homes are bought and sold. This is where the first-time home buyer market is! (FHA Mortgages), I like to stay in the median price up to current FHA limits. See this website for FHA limits in your area..., Stay away from rental areas, Look for homes in good school districts., 3+ bedrooms, 1.5+ bathrooms. (4 bedrooms sell the fastest!), Personally, in my market, I stay away from condos and townhomes., Market Research, median price, trulia heat maps, Find average rents, trulia.com, zillow.com, rentometer.com, hotpads.com, Craigslist
What is in a Marketing Plan?, How much do you want to make a month?, Work backwards from there, Two Important Numbers You Must Know, How many sellers do you need to talk to every day? (How many leads do you need?), How many sellers should you contact every day? Every week?, Try to answer the following questions, Who?, Who am I targeting?, What?, What am I sending them?, What kind of house am I targeting?, When?, When do I send my marketing?, How much every day / every week?, How consistently should I market?, Where?, Where is my target market?, Where do my buyers want to buy?, How?, How am I going to send this marketing?, How do I send the postcards / voice messages / texts, etc?, How am I going to pay for it?, Why?, Why am I doing this anyway?, What's your big WHY?, Important Notes, Keep it simple!, It's okay to make changes to your plan. It is not written in stone, Take your estimates and double them. Be conservative. Under promise and over deliver., Don't rely on just one form of marketing - you need to have at least 3-4.
Example, Spreadsheet, Numbers:, goal to make $120,000 / yr, $10,000 / mo, average profit = $4,000, 3 deals a month > actually 6 houses under contract / month, 6 x 20 = 120 sellers that you talk to every month, 120 / 25 days = 5 sellers a day that you should talk to, 1/2 come from craigslist & 1/2 from postcards, 60 craigslist sellers / month, 60 / 15% = 400 sellers on craigslist that you send marketing to every month (voice blasts, text messages, emails, cold calls, etc), 15 sellers a day that you send marketing to in craigslist, 60 / 3% = 2,000 postcards every month, 500 postcards a week, 2000 x $0.40 = $800, all leads go to voice mail?, note that you should call all the sellers back from postcards whether they leave a voice mail or not, 2,000 x 3% = 60 calls a month = 15 calls a week, maybe half will leave a message, cycle through your list, 6,000 names - target, send 2,000 every month, someone will get a postcard from you every 3 months, lists to target, absentee owners in median price neighborhoods, FHA borrowers who bought in last 3 years, target ACTIVE listings over 160 days old, target median price homes, get the tax address to send these postcards to, IMPORTANT - where is the biggest demand for housing?, Other Forms of Important Marketing, Yellow Letters to Zillow Rentals - 20 / day, Emails to Realtors - 1,000 / week, zBuyer Leads - $100/mo, Call Property Managers and Realtors of rentals - 10 / day
Action Steps, Do some market research. Where is the demand?, Write down on 1 piece of paper what kind of marketing you need to do every day and every week., Write down a realistic marketing budget., Get someone to hold you accountable to your marketing plan
Craigslist, For Rent, For Sale, Never place ads, You contact them - you only talk to people who raise their hands
Absentee Owners, Owned the house at least 1 year, 3+ bedrooms, Nice homes, nice neighborhoods, Median Price and above, 30 minute drive from your house, Listsource or Listability
Zillow, Note: What are your best zip codes from earlier?, Look for the "Make Me Move" properties, Sort by "Newest", These properties might be more open to creative purchase strategies like Subject-To or Lease Options, "Would you be open to leasing your property for 1-2 years and then selling?", "What are you going to do if you can't sell this house? Rent it?", "If I could show you how you can get the same equity you would get if you sold through a Realtor, would that work for you, or probably not?", These leads may not be that motivated yet - but they will be someday. Add them to your follow up system., If you're a Realtor, these are great leads for listings, Look for "Rental Houses", Call / Slydial, www.SlyBroadcast.com, Contact them all at first, then just look for the newest properties (sort by "newest"), Or, send email, I prefer calling since Zillow might start blocking you if you send too many emails, If it's a Realtor / Property Manager, "I am an investor, looking to buy more homes in this zip code. Your client wouldn't have any interest in selling their property, would they? You can represent me and get both sides of the commission.", After you talk to them, "You wouldn't have any other clients with rental properties they would like to sell, would you? You can represent me as a Buyer's Agent.", Ask them if you can send them your contact information. Add them to your weekly email follow up series., You can also ask these Realtors if they know of any investors looking to BUY properties. Use this to build your Buyer's List, These are still GREAT leads!, Note: don't contact ones that bought the house within the last year, See sample spreadsheet for tracking these leads, Don't bother with houses bought less than a year ago, Get owner's information on County Assessor's website (or RealQuest Express), Spreadsheet, Send yellow letters (Or postcards), We're seeing a 20% response rate with these letters, Crumple the paper up! It increases response rates for some reason., You will get returns. It's normal. Skip trace these leads, TLO, Intellius, Spokeo, Put door hangers / post it notes, Ask neighbors, Reverse lookup for phone numbers
Follow Up, So critical. 50% of your deals will come from your follow up, Your best list is your follow up list!, Sellers, Put them in autoresponder series, Mailchimp, iContact, Ask them if their house is still available? Have circumstances changed?, Keep your emails short and to the point. Don't make it sound spammy., Send a letter and contract to every lead (EVERY LEAD!), "Hi Mr Seller, It was great talking with you the other day about your house on 123 Main St. I know now may not be the best time for you to sell your house to us. But if your circumstances change and you would like to reconsider my offer, our offer still stands. See the attached contract. Call me anytime. I wish you the best of luck in selling your house. Sincerely, Joe, Realtors / Wholesalers / Landlords / Property Managers, Send weekly emails, They're going to forget you, Non spammy emails, "Do you have any deals?", "Any hard to sell deals?", "Anything I should look at?", 1-2 sentences with a phone number. No websites
Expired Listings, Get from the MLS, If you have access to the MLS, check out TheRedX.com, Post a job on Craigslist to find someone who can give you this list for very little money, "I don't want to list your house. I want to buy it.", "Don't list your house again. Sell it."
FHA & VA Loans in the last 3-5 years (home owners), Why would someone who bought a home in the last 3-5 years with an FHA or VA loan be a great candidate for a lease purchase?, Because many of them would like to sell a house, but because they only put down 0% - 3.5%, they probably have NO money to pay a Realtor and sell the house the traditional way, No one else is marketing to them! You have virtually ZERO competition, Also, the chances are that these homes have probably not fallen in value that much over the last 3-5 years (depending on your market of course), How do you get this list? Listsource.com is one place. See video >>>
Other Investors / Rehabbers / Wholesalers in Your City, Find someone who is doing tons of marketing for traditional wholesale deals or rehabs (like a Homevestors). Ask them what they are doing with all their dead leads. Offer to pay them 10%-20% for every lead they send to you that you sell on a lease option, Make sure you track all the leads they send you. Nothing is more frustrating than sending a lead to someone thinking that they will follow up immediately, and then find out they never did., Track the leads in a Google Spreadsheet and give the other investor access to that spreadsheet so they can see it anytime they want.
Craigslist, Scrape Craigslist, What to look for?, Where is the demand? What price range are you looking for?, For Rent example, 2+ bedrooms (3?), $700 min rent, $1,500 max rent, Keywords: -townhouse -townhome -apartment -apartments -condo -realty -management, For Sale By Owner - example, 3+ bedrooms, Prince range > $100,000, Keywords: none, How many a day?, Suggest a minimum of 30 a day, (As many as you can!), Put the ads in Google Spreadsheet, Spreadsheet to remove duplicates, Make a copy of the spreadsheet so you can play with it and not be afraid of messing it up, Upload it to Google Drive, What to send, Text Messages - with Google Voice, Or mightytext.net, vumber.com (mobile phone app), Voice Messages - with Slydial (or SlyBroadcast.com), Emails - (if Text Message or Slydial doesn't work, or there is no phone number), Use at least 3 different email accounts. Rotate between them., Also write at least 3 different email scripts, Gmail, Hotmail, Yahoo Mail, Process Diagram, The Message, For Rent, Text Message, Hi! Saw your property on Craigslist. Would you be interested in selling it? We can give you a fair price and close quick. Call me at 555-555-5555. Thx! - Rick, Saw your property on C-List. You wouldn't be interested in selling, would you? Call me @ 555-555-5555. Thanks! Joe, Voice Mail, Hi! My name is Rick and I saw your rental property on Craigslist. You wouldn’t have any interest in possibly selling it, would you? I am looking to buy another investment property in the XYZ area in the next couple weeks. If you’re interested in selling your property in the fastest, easiest way possible, call me today at 555-555-5555. We can give you a fair price, buy your property as-is, and close on any date you choose. Call me and I can explain more details. Again, my number is 555-555-5555. Thank you!, (Or - make it even simpler / less salesy - "Hi! My name is Rick and I saw your property on Craigslist. You wouldn't have any interest in selling it would you? Call me if you're interested at 555-555-5555. Thank you!") - Test it, Remember to smile when you are talking - sound positive and confident, Email, Rotate between these emails in 3 different email accounts, Email 1, Email 2, Email 3, FSBO, Text Message, Hi! I am an investor and I saw your property on Craiglsist. Is your price negotiable? If it is, please call me at 555-555-5555. Thx! Rick, Voice Mail, Hi! My name is Rick and I saw your property on Craigslist. I am a local investor looking to buy something in the XYZ area in the next couple weeks. If your price is negotiable, please call me at 555-555-5555. Again, that is 555-555-5555. Thanks!, Email, Rotate between these emails in 3 different email accounts, Email 1, Email 2, Email 3, What if you don't have enough ads in Craigslist?, Expand your search criteria, Pick an additional market, Don't rely just on Craigslist. Do more marketing of different kinds.
Direct Mail, Advantages, You can target the homes you know will sell the fastest, You can hide your marketing from your competition, It works!!!, Few investors do this consistently, Postcards, Sample Postcards & Misc Stuff, Another example "We Buy Houses" & "Lease Purchase" script for a postcard, Make it your own. Track your results and see what works, Has to be simple and personalized. Use yellow card stock, Consistency and follow through so very important. You will get most of your deals from your 2nd and 3rd postcards. Send every couple months. You should expect a 2%-4% response rate., Click2Mail.com, Video 1, Video 2, Yellow Letters, Sample -, If you have a PC - http://yellowlettergenerator.com/, YellowLetters.com, Coupon Code: Joe McCall, Mail to Listed Properties?, If you're not a Realtor, you could send fliers to listed properties., Try to target homes that are over 6 months on the market? (Maybe 3+ months?), Don't let the Seller try to cancel their listing, Don't waste your time arguing with Realtors, Tell the Seller that you work with Realtors. You are just offering them more options., YOU are the Tenant-Buyer!, Ask the Seller what the listing agreement says if they lease their property & they find their own tenant-buyer?, Sample Brochure from Student in Canada, Sample Postcard from John Jackson's newsletter at www.LeaseOptionClasses.com, If you want more information on this powerful marketing concept, visit John Jackson's site & go to one of his events. I went & it was VERY good., NOTE: When doing a direct mail campaign, you will get a better response using a typical "We Buy Houses" message than a "Lease Option" message
Post-It Notes, Get yellow post-it notes that look like they're from the UPS, Works great when you are TARGETING specific neighborhoods - blanketing a neighborhood - being a big fish in a small pond., Cheaper than postcards, To find someone to do these for your, just Google "flyer distribution (your city)", Sample Post-It Note, Good website to buy these
It's important to get the phone to ring, but if you don't know what to say to the Sellers when they call, you are not going to get anywhere
Keep it simple. You don't have to close the deal on the phone.
Build rapport & trust
Find out about their SITUATION - not necessarily the "property", Find out what their NEEDS are, Side Note: Find out what they NEED & how you can best help THEM! It's not about you - it's about them and how you can best serve their needs., Big mistake to have your main focus on money instead of changing lives / helping people.
Just get them to say "yes" (get them to say it twice!) to wanting to do business with you. If they say "Yes", send them some information.
Follow up & give them deadlines
Again, don't waste your time with unmotivated sellers. You should know within 3-5 minutes if they are motivated or not. If they aren't, get off the phone.
Don't let the tail wag the dog. Stay in control of the conversation., How do you stay in control?, Ask a lot of questions.
Good attitude to sellers - "I don't need your business, but I do value your business."
The harder you chase them, the faster they will run.
Why? To follow up with old offers, track sellers, add them to your mailing list, to track your marketing (what works & what doesn't)
Lead Tracker Sample, Recommend having several folders that you carry with you:, New Leads to Call, Hot Leads to Follow Up, Dead Leads, Blank Lead Trackers, Send these leads to your VA to update your database
Main thing I used to use, Yellow pad, Folders, Give to my VA or Selling Manager to update Google Doc Spreadsheet
Now I use Podio & LOVE it
Others, REIBlackBook.com, Zoho, Freedomsoft, Realeflow.com, HighRiseHQ.com
Remember - listen and ask questions!
"Sounds like I caught you in the middle of something?"
"I am looking for an investment property in a nice area that I can rent for a year and then buy. That wouldn't work for you, or would it?"
"Do you mind if I ask you a few questions about your house to see if it would even be something I would be interested in?"
"Mr Seller, I am going to ask you a few questions to make sure that a Lease Purchase can really meet your needs. While I hope we can do business today, I want you to be comfortable enough to also tell me that you are not interested, if this is not what you are looking for. Is that okay with you?"
Good Questions, What is your situation? Why are you selling?, How quickly do you need to sell?, What would you like to see happen?, What are you going to do if the house doesn't sell? (Rent it?), What do you think the property is worth?, How did you arrive at that number?, What kind of repairs does the property need?, Do you own the property free & clear, or do you have a mortgage?, If we can pay cash and close on any date you want, what would be the least that you would take?, Can you do any better than that?, Would you be open to leasing your house for a year and then selling it?
Peter Conti Article, Also see - Excellent Chapter from Peter Conti's book "Multiple Streams of Income"
Would you be willing to rent your house for a period of time, and then sell it at the end of that time?
How much do you need to walk away with?
What do you need in monthly rent?
Send them the "Short Offer Form"
"We will buy your house" - 65% ARV - (Regular Wholesale Offer)
"We will be your tenant-buyer" - 80-85% ARV - "Perfect Tenant Program" (Traditional Sandwich Lease Option), Would recommend getting at least 5 years to exercise the option, $300 - $400/mo net cash flow, $30k-40k back end profit. Hint: get 50% - 100% rent credits!, You tell the seller that you are going to give them the same equity they would get if they sold through a Realtor, "We be will your tenants, we will take care of all the day-to-day maintenance, you will guarantee the rent even when it's vacant, ...", You can wholesale this to another investor or to a tenant-buyer. It would be best to wholesale this to another investor you know and trust, Make sure you don't offer to make any payments until you find a tenant-buyer. And make sure you have a clause that you can give the deal back to seller with a 30-60 day notice.
Wholesale Lease Option - "We will Lease Purchase your house."
"We'll teach you how to do what we do" - Consulting Agreement, They may want to do all of this themselves. Tell them you will help them and coach them to do it all themselves. You will give them all your marketing secrets and unlimited phone call and email support. You need to charge at least one month's mortgage payment. Make sure they do all the work and sign all the documents.
Owner Financing - give them full price, 0% interest, at least 5 years
If it's underwater - offer lease purchase for at least 10 years, set option price at loan balance in 10 years
If none of the above works, refer to a Realtor - find a investor friendly realtor who will pay you referral fees
You will find that maybe even half of your deals will come from follow up campaigns.
E-Mails, Sample Follow Up Email, EyeJot.com, Send them a follow up video. Check it out. I would suggest the premium version so you can send them a PDF
Calls, Call no more than 3 times
Send something in the mail - VERY IMPORTANT, Letter of Intent, Simple letter, Thank them & remind them when you were talking, Offer some preliminary numbers, Rent, Price, No commissions, Time frame, Sample One Page Contract (Short Offer Form), Brochure, Sample Brochure from Student in Canada, Business Card
Greeting Cards, Very personal & inexpensive, Easy to set up a drip campaign - send them a postcard every couple months, Check Out "Send Out Cards"
"No" means "Not Yet"!!!
Remember, you only want to deal with MOTIVATED sellers. Get off the phone if they start arguing & debating you, or they start nick-picking how much money you make.
Remember - you are making an OFFER to buy their house. You're OFFER is based on your terms. Don't worry about whether they will want to keep part of the option deposit. That is not in your offer. Think of it more like an OFFER to buy their house. They can take it or leave it. It is all on your terms.
BEFORE SETTING AN APPOINTMENT: "If we can agree on the numbers, will you be ready to sign an agreement today?" Or, "Are you ready to make a commitment today if we agree on the terms? I am sure your time is valuable. I know mine is. I don't want to waste your time. What I don't want to hear is, 'Well, I need to think about it.' When we meet, will you be able to tell me 'yes' or 'no'?"
A good question to ask sellers after you propose something is, "Is that reasonable?" Why is it such a powerful question? Because it's very difficult to argue or disagree with reason. Try it! It works.
Get a Commitment - a Decision
You're in Business to Make Money Today
People make decisions now based on emotions, and justify them later with logic, Try to drive them from pain - to pleasure, What are their pain buttons?, What would make them feel good?
"Lease Purchase GUTS" with Claude Diamond, www.ClaudeDiamond.com, Live Seller Call with Claude Diamond 1, Live Seller Call with Claude Diamond 2, "Don't be a Shmuck" video from Claude, "The Psychology of GUTS Sales" video, "Warm and Fuzzy Doesn't Work" video, My Interview with Claude, Podcast Interview with Claude, Free ebook by Claude Diamond - "Conversations with a Lease Purchase Mentor", GUTS Sales Method Primer, GUTS - Success Staircase, Agenda, Get permission to ask questions, Draw a road map, "Mr. Prospect, if you don’t mind, I’d like your permission to ask you a few questions. Basically, why are we talking today? What’s the purpose of this conversation? Why am I here? What would you like to see happen? I’d like to find out what your needs are. I’d like to ask you some questions about what you’re comfortable spending and how you make commitments and decisions. Would that be all right?", Tell the seller it's okay to say no, “Mr. Diamond, I’m going to show you my product, I’m going to answer all of your questions. If it’s not right for you and if you’re not comfortable with the product or service, if you don’t like the style, if it is not within the limits of what you wanted to spend, it’s OK to say 'no' to me. Can you do that, Mr. Diamond? Can we just be honest with each other?", Another example, Miss Prospect, if it’s all right with you, I’d like to ask you a few questions. What I basically want to find out is why we are talking to- day, what your needs are within your budget, what you are comfortable spending and how you make decisions. At the end of our conversation, you can ask me some questions and what I’d like us to do is to come to a conclusion about whether we should go ahead and do business or not. If you don’t feel my product or service is right for you or my house (if this is relating to real estate) is not right for you and you don’t want to move in, I want you to feel comfortable enough to tell me that this is not the home (product, etc.) for you. Can you do that, Miss Prospect?, Qualification, Needs and Greeds - why are they talking to us? How motivated are they?, Money / Finance - make sure they can do the deal, Time - can they make a decision today?, "Is there any reason why we couldn't do business today?", Commitment - are they serious and ready to move forward?, Close, Finally make the presentation!, Review, Ask the question, What would you like to do next?, Where should we go from here?, What do I need to do to get your commitment today?, Deadline
It's true - you will probably close more deals if you meet with the seller in person. If you can pull this off - great! Go for it!
BUT - Don't waste your time with unmotivated sellers!
Tips, Ask good questions - qualify the seller, What is your situation?, Why do you want to sell the house?, How quickly do you want to sell the house?, What would you like to see happen?, Are they ready to do a deal today?, "Sir, I know your time is valuable and so is mine. I am extremely busy & my week is booked solid. If I come out to your house, and after I explain how our lease purchase program works, and if you agree on all the terms and numbers, will you be ready to sign an agreement at that time? I don't want to waste your time. So what I don't want to hear is, "Well I need to think about it." Can you give me a "Yes" or "No"? I hope you can understand that. Is that reasonable?", Who is the decision maker? Does the spouse need to be there?, Get familiar with the neighborhood. Bring comps - sale prices and rental comps, See zillow & trulia, Get rental comps too, Can you find out neighborhood secrets? How many foreclosures in the neighborhood?, Remember you are a guest in their home, Build rapport before you give your presentation, Be professional - dress nice, Maintain eye contact - give a strong hand shake, Be assertive - "If we can agree to the terms, can we sign an agreement today?" If no, then "Why not?", Make it easy for them to say "Yes", Bring your paperwork, Tell them they can cancel anytime, Are they worried about what the neighbors are going to think? Tell them you don't have to put a sign in the yard., Don't be afraid to explain the risks - before they bring them up, Keep your sense of humor. Be yourself., If you don't want to meet the Seller, hire someone to do it for you., Send a follow up thank you card / letter
Important Notes, Sometimes you just can't answer their objections, or satisfy them. Maybe they're just not motivated enough. That’s okay! Move on to the next one!, Sometimes the best answer is "I don't know.", Also, it’s okay to tell a seller something like, “You know, that’s a great question. I've never been asked that before. I don't have the answer for that right now. Would it be okay if I get back to you tomorrow with a better answer? Let me talk to my business partner.”, Empathize & Clarify & Ask Questions – Listen!, Keep your answers as short as possible & move on & asking another question., What is their true objection? Why are they asking this question?, Helpful 1-2-3 Tips, Call them by name, Agree with them, Ask them a question, "Mary, I agree with you. That would concern me too if that happened. Mary, what would make you more comfortable if that were to happen?"
Why do you get to keep all the money? I want a security deposit., Don't think that you have to go into much detail about your fee with the seller. Just tell them we are going to add our fee and the rent credits to the price of the home - the price that the seller needs to walk away with. (You just need to make sure that the house will comp for that higher number.), "That's just the way we do it. I am so busy with so many buyers right now. It's not worth it to me to keep only half the option deposit. It sounds like you have some experience and your know how to do lease options. Why don't you just do it yourself and keep ALL the option deposit?", "What are you going to pay your Realtor to sell the house?", When a seller asks about my fee, I basically tell them, "We're giving you the price you want without paying any realtor commissions, the rent you need to cover your mortgage payments, and a tenant-buyer who will take care of your house and probably buy it in 12-24 months... all at no cost to you! What more could you ask for?", If the seller objects to you keeping all the option deposit as your fee, tell them they can still try to sell the home on their own & if they find a buyer before you do, they can keep all the option deposit & will owe you NOTHING. What is there to lose? Tell them you're putting a lot at risk with your time, effort and marketing expense., You could tell them that if the tenant-buyer you find doesn't work out, you will help them find another one & they can keep the entire deposit the next time. You will only ask them to reimburse you for your marketing ~ $500., You could guarantee the security deposit that they want - promissory note? extra addendum to contract? (as long as the seller gives the investor the opportunity to find the next tenant-buyer), If the deal is good enough, you could give them maybe one month's rent, or max $1000. Make sure they work for every penny of that money (like take pictures, video, pay for the lockbox, etc). I would make sure you write in the contract that you get that $1,000 back when the tenant-buyer buys the home., ask them how much of a security deposit they want?
I want my attorney to review these documents, First & foremost - it's okay for them to want their attorney to review your documents. Tell them something like, "That's great. Totally understandable. In fact I recommend that you do have your legal council review these documents. What are some of your concerns?", The attorney thing is a bluff in most cases that they don't trust you or they don't understand. It is a very valid objection. But you must stay in control!, Some things you could say..., “What can I explain better? What would make you feel more comfortable?” And then address those issues., "Our agreements are copyrighted and our attorney will not allow us to leave them with anyone. However, I would welcome the chance to contact your attorney directly so he can review the paperwork. Give me his name and number and I will set up a time for us to meet.", (Something along those lines keeps you in control and will let you know if someone is attempting to scam you for your contracts.), THEM: I need to have my attorney to review these documents. YOU: Great idea, as I pull out my cell phone. What is his number so we can set an appointment. THEM: UHHHHH, I want him to review them with us. YOU: I totally understand how you feel. These are scary looking documents. But these documents were prepared by legal staff already. Interpretation is pretty easy. But I need to be sure your attorney understands them. Very few attorney's have done lease option agreements. Let me ask you a question. Do you know how many investment properties your attorney owns? THEM: NOPE. YOU: Okay. What is his number? YOU: Which documents don't you understand?, If you didn't have much patience and wanted to be a jerk, you could also tell them - "Go ahead and pay $500 to have your attorney to review this. But I won't change anything in it.", I have done this to Tenant-Buyers before! But never to a Seller, If they still want their attorney to review the docs, tell them to go ahead and let's sign the docs now with a "7 Day Right of Rescission". Then give them 7 days to review the contracts with their attorney and cancel it if they want.
What if they don't pay their rent?, "Call me!", "We get to do it again!", "It could happen. But it's important to start the eviction process as quickly as possible - the day the rent is late.", Usually, their main concern is that it is going to be too hard to evict the tenant-buyer if they are late on their rent. I tell them that it is not as hard as they think to evict a tenant. The key is to start that process as quickly as possible., Remind them that this is the same risk if they are going to take if they do it on their own and do a traditional lease. In fact the risk is GREATER if they do a traditional lease., Google "AON Rent Insurance"
What if they trash the house?, "I understand - that would concern me too. What does that mean to you? What concerns you about that? What comes to your mind?", You don't want to bring up concerns that they didn't even have to begin with. What if they were just concerned with some holes in the wall, and you start talking about concerns of completely trashing the house? Then that kind of response might even push them further away., Again - remember - listen, ask questions, "We could find another tenant-buyer that will fix up the home.", "If there is some damage to the home, you don't always have to fix it yourself. You could advertise the home next time to a Tenant-Buyer as a Handyman Special and give the new Tenant-Buyer a "Work For Equity" credit when they buy the home if they fix it themselves.", "You have to remember that the TB's are trying to purchase the home. They put down a large deposit that is non-refundable if they don't buy the home or take care of it.", "Also, don't forget that you can and should inspect the home every couple months to make sure they are taking care of it. You still own the house."
What if they don't buy the house?, "We can't guarantee that they will buy it. Remember, they are putting down a large deposit that they forfeit if they don't buy the home.", "So, let's say they don't buy the home... You have had someone paying your mortgage payment for the last couple years, you have been paying down your principal, they have been taking care of the home, etc... Who knows, the market may have improved by then and you can sell it to the retail market again. Or, you can certainly just as quickly sell it again as a Lease Purchase. Remember, we can find someone really quickly again for you."
What if the house won't appraise?, You don't have to lower your price. You don't have to sell it if it goes lower. Several things could happen..., 1) The tenant-buyer may have to come up with the extra cash to buy the house., 2) You may have to renegotiate the option price with the tenant-buyer. Keep in mind, you don't have to., 3) You could negotiate a longer lease option period. Tell the Tenant-Buyer, "Sorry, I can't lower the price. But I will give you another 12 months." (at no penalty, no extra cost), 4) Find another mortgage broker or bank that will appraise the house for the option price. (That's why it's important to have a good mortgage broker on your team.), Note: remember, there are no guarantees - ever. The price of the home may go down... But it may also go up! No one can know what's going to happen.
What if the house is worth much more in a couple years?, Share half of the appreciation with the TB & the Seller, Set the option price at the average of two appraisals at the end of the option period
Why such a long time for them to buy?, "We normally see our buyer's improve their credit score by 50-100 points over 12 months - which is really phenomenal. But unfortunately, that takes time. You can be assured that we will be working hard to get them financed as quickly as possible."
When they ask for references & experience, A lot of times, people will ask for references to build credibility. How to respond? Maybe, you can "fake it until you make it.", Sometimes sellers will ask for references of people I have helped in the past. I tell them "No way. I get asked that all the time. How would you like it if you were getting called 2-3 times a week by complete strangers? That's why we have testimonials on our site. If they're not good enough for you, I can't help you.", Remind them of the benefits of lease options. Ask them what they are worried about? What do they have to lose? I have the buyers. Do they want them or not? This isn't a fishing expedition., When I get these kind of suspicious questions, I always say, "Look, this probably isn't for you. That's okay if you don't feel comfortable with us. I don't want to waste any more of your time. I am extremely busy with all the buyers and sellers we're working with right now. Can I send you some information so you can have a chance to look it over and think about it?", It's amazing how the tone changes after I make it clear that they really need me more than I need them. I am here to solve their problem - not the other way around., It's important to remember that you need to stay in control of the conversation. If they are asking for references, that is usually a sign that they are not motivated enough to work with you. So you don't need to really waste any more time with them., Note: It helps to be able to tell people you have a realtor's license
Misc Tips, Don't over-promise things. Don't obligate yourself to things outside of your control., Important to set the seller’s expectations low. Tell them that tenant-buyers need help. You probably aren't going to find someone that walks on water and can get a mortgage in 3 months., It's important to explain all the risks of lease options to seller., Don't pretend to be a Realtor. You are in investor (a BUYER) and you are not looking for a listing. You are not representing the Seller or Buyer. You are not going to "find a buyer for the seller"., Read this excellent article by Shaun McCloskey from Short Sale Wealth, Good article by Don DeRosa, How do you build confidence?, Believe in your offer, Make sure you're meeting the seller's needs, Build rapport with the seller, Provide the seller with an objective basis for your offer, spreadsheets showing how you calculate your offer, comps, market research - average days on market, average discount buyers are getting from list price, average decline of prices?, average number of foreclosures, Know how you will overcome objections, "Two Fundamental Negotiating Skills All Investors Must Master", The reluctant buyer, I don’t know if will be able to do this or not but…, With all that’s going on in the world today I’m not even sure now is the time to buy another investment property, may I ask you a couple of questions first to see if this is even a property that I would want to buy?, Being a reluctant buyer means you are structuring your negotiation so that the seller is constantly being put in the role of selling you on the idea of making a deal happen., Negative Phrasing - look at examples, A good question to ask sellers after you propose something is, "Is that reasonable?" Why is it such a powerful question? Because it's very difficult to argue or disagree with reason. Try it! It works.
Sample Seller Credibility Kit 1
Sample Seller Credibility Kit 2
What sells a Lease Option Home?, Location, 3+ bedrooms, Affordable rent, Nice home in nice neighborhood, 30%+ Rent Credits (only good for the first 12 months), Videos & Lots of Pictures, Exposure - lots of marketing - craigslist and bandit signs, Having a Buyer's List, If you have a property that needs repairs - Handyman Specials, Handyman specials get lots of calls. If you have a house that needs work, don't do any of it yourself until you market the home for at least a month as a “handyman special / work for equity”., Give the tenant buyer a credit at closing if they do the work themselves. Make sure you get them to do the work before they move in if you need to have an occupancy inspection., Consider advertising no application fee (?). Or, "if you are not approved, we will reimburse your application fee."
You need to have a system – a plug and play process to make this work smoothly.
This should be the most systematized part of the business and should all be outsourced. And if you are going to outsource it, why not outsource it to a Realtor?
Consider hiring a Realtor to advertise your property as a rental / lease option listing. This helps with avoiding the "brokering without a license" issue
When you outsource, only pay your Assistant / Realtor when you get paid - if & when you get paid
Craigslist Ad For Finding Realtors / "Leasing Agents", "I am an investor & I need a Realtor to help me lease my properties. Reply with your information.", Pay them 1/2 to one month's rent
Start Here, 1) Postlets, 2) vFlyer (see video in attached node), Here's a video I created for my VA to create vFlyers, 3) Hotpads, 4) oodle, 5) Zillow, Others?
Things your ads could say, "Lease To Own", "Rent To Own", "Everyone is qualified", "Bad Credit OK", "Forget the banks.", "You're approved", "We will help you fix your credit", "We understand bad things happen to good people. You can have a second chance.", "Rent now, buy later."
Try to do "For Rent" and "For Sale" ads
Create an ad for each day to be posted on Craigslist.
Sample ads & sample flyers, Generic Rent to Own Flyer, Sample Rent To Own Classified Ads, Rent to Own Tear-Off Flyer
Great Article on Craigslist - sorry, I don't know who wrote it, but it's good!
Misc Sites to Advertise On, SEE CHECKLIST, Note - Google "Rent To Own Homes YOUR CITY" & see what comes up. You may find some good sites to advertise there, #1 - Craigslist, Try to post your ads at 11:30 AM - right before lunch, Monday and Fridays are the best days to post ads, Backpage.com, Kijiji.com, FillMyProperty.com, Owners.com, epage.com, RentDigs.com, base.google.com, ByOwnerMLS.com, Zillow.com, Trulia.com, OLX.com, ForRentByOwner.com, iOffer.com, Sometimes, Rentals.com or RentalHouses.com, www.Lease2Buy.com
Have a large yellow sign in the front yard w/ flyers
Put 5+ signs in the yard. You will get twice as many calls. Of course, make sure the owner is okay with this if they live there. If they don't live there, don't ask them. Just do it!
Bandit Signs - very important!, Will get you the best response. Put 10-20 signs out in the neighborhood of every house you have and you will get flooded with calls, I like simple, yellow, handwritten., 4 lines - "OWNER WILL FINANCE" - "BAD CREDIT OK W/ $5,000 DOWN" - "3/2/2 huge backyard" - "555-555-5555", "Rent To Own, 3% Down Moves You In, Phone", Good site with audio reports on properly using bandit signs, Example Signs..., Have a website where potential buyers can sign up, See Keith & Shannon Site, You want a simple site where they fill out their information so you can contact them later., Make this site different than your main site., Things you need to ask, Min Down Payment, Min Rent, Number of Bedrooms, Special Features That Are Required, Name, Email, Phone Number, Suggested Websites for Opt-In Forms, MailChimp, aWeber, iContact
What to Have Inside the Home, Applications (see Step #4 below for sample applications), FAQ's, List of Other Homes in Your Inventory, Free Report on How to Buy a Home with Rent to Own, Free Reports on "How to Sell Your Home Quickly on a Lease Purchase", Maybe a flyer for bird dogs?
Put a "We Buy Houses" sign in the front yard
Advertise EVERY DAY on Craigslist!
Send to your Buyer's List
Social Media: Youtube, Facebook, Wordpress Blogs
Important to be ACCESSIBLE! Don't make callers jump through a bunch of hoops to reach you
Voice Mail, We use www.VoiceNation.com, In your voicemail, explain the program., VoiceMail Script, Special Note: You can have all voice mails go to an assistant to put them in a Google Doc, or to a website that converts voice mail to text. (I like PhoneTag.com)
Showing the Home, Always ask the Seller if they can show the home. Chances are, they are already showing the home., If they can't show the home, ask them if you can put a lockbox on the property. Tell them that you will get an application on each person before you give the lockbox code, You could have 1-2 Open Houses a Week - 30 minutes long, When you do have to meet the Buyer at the house:, Make sure they have already driven by the house, Make sure they call you when they are leaving. Don't leave to meet them until they call you!, Tell them to bring their checkbook! You will hold the home for them while you review their application.
NEW: if they tell you they don’t have enough for a down payment / option deposit, make sure you ask them if they have a 401k or another retirement account. Tell them they can borrow against their 401k for a down payment on a house. THIS IS VERY IMPORTANT! You will get deals that you wouldn't have gotten otherwise!
Scripts for the tenant-buyer
Applications, 1 Page Application, Larger Application, Another Sample Application & Misc Info, Letter Denying an Applicant
Pre-qualifications / Criteria, Most Important: Can they afford the house? Are they going to be in over their head? Good rule of thumb: Gross income should be at least 3-4x's the rent, Do they have the cash necessary for the first month's lease payment and option fee?, Verifiable landlord references & tenant history - at least two last landlords! No evictions in last 4 years, Verifiable employment history & income, Pass criminal background check (misdemeanors & minor infractions okay), Are they committed to restoring their credit (if credit is the issue) so that they can qualify for a mortgage within 12-24 months?, Do they really want to own the home instead of being a career renter?, NOTE: Important to have all qualifications written out on your website or on your application.
Once you get the application, what do you do with it?, Send application to your mortgage broker / credit repair company, You want your mortgage broker to tell you if they have good enough credit to get a mortgage in 1-2 years if they go into a credit repair program, What do you want to know from your mortgage broker?, 1) Why is the credit bad?, 2) What do they need to do to repair their credit?, 3) Approximately how long will it take to repair their credit?, 4) Do they meet the current minimum debt-to-income requirements to get a loan?, Note: Try to find a Mortgage Broker that also has a credit repair company. Ask the Mortgage Broker if they would consider reimbursing the Tenant-Buyer (or whoever is paying the credit repair) all the money spent for credit repair IF they service the tenant-buyer's mortgage., If the Mortgage Broker tells you that they are a good candidate for credit repair, THEN you can review the rest of their application, Call previous landlords, Do a criminal background check, Call references, Verify employment and income, Website that some people recommend, Another site I have heard people recommend, MySmartMove.com, http://ltservices.us/, Interview the applicant, Maybe interview them at their home. Note if it's a mess. Do they take care of it?, After you interview them, walk them to their car. Is it a complete mess?, Maybe interview the applicant with the Seller there? I have done that before. It depends on how well you know the Seller
Get a deposit from the applicant if they like the home
Once you find an applicant that you like, get all the information together and call the seller. Let them know you found someone & get the rest of the paperwork signed.
After you find a good TB, you need to verify a few things
Make sure the Seller is not behind on payments
Make sure the title is marketable and the Seller is the Owner on Record
Make sure the house is not "over-encumbered" - they don't owe way more than the house is worth.
Important principal - the easier you make a house for people to buy, the easier it will be to sell
If you don't find a TB in 3-4 weeks, something is wrong, Rent is too high, Property is ugly, Needs too much work, Not advertising it properly, Rough neighborhood, It's not where people want to live, You might be asking too much for Option Consideration, Seasonal? Holidays are tough sometimes
Important to know current FHA & widely accepted underwriting guidelines, credit scores, down payment requirements, debt-to-income ratios, length of time between foreclosures or bankruptcies, number of recent late's, Which types of judgments or collections are maybe okay & which ones are definitely not okay, Make sure you find this stuff out with your mortgage broker
Mortgage Brokers, Great source for Buyers!, HUGE!!! - Ask a mortgage broker what they do with their dead leads?, With a mortgage broker on your team, imagine what you can start telling sellers "I have a HUGE buyer's list from my mortgage broker for people who can't get a mortgage just yet - who need a couple months.....", When looking to add a Mortgage Broker to your team, here are some good questions to ask them:, Are you a real estate investor? Do you deal with investors?, What are your specialties?, Have you done any loans for buyers under a Lease Option agreement?, Do you have a good credit repair program that you recommend?, What kind of results do people in that credit repair program get?, What are some of the requirements that buyer's have to have these days to get a loan?, What should I look for in a tenant-buyer who I want to get a mortgage in 6-18 months?, Do you deal with buyers who have poor to fair credit ratings? If not, what do you do with those leads? Does anyone in town specialize in buyers with poor credit?, What parts of town are the best to invest in right now?, What areas of town are rents increasing?, What are investors doing that you work with? What part of town are they working in?, Can we get a pre approved letter? What are the requirements?, What do you do with the applications you get from people looking for a mortgage but just aren't there yet?, If they throw them away, ask, "Can you send them to me? I will put them in a house and put them into your program."
Credit Repair, Very important for a couple reasons. It helps the tenant-buyer get a mortgage quicker and it makes the seller feel better about the deal. It helps in your presentation to the seller when you tell them that all your tenant-buyers are required to go through a credit repair program & it usually takes 1-2 years to get back on track., Some of my recommended credit repair companies (do your own due diligence), Quality Credit, CMAC, Lexington Law, Help them get a secured credit card, Make sure they understand that they can't get into any more debt and they MUST pay all their bills on time, Important: Try to find a good local credit repair company you trust. You want to know who you can hold accountable if they don't do a good job following up with the TB. You are looking for a company that will take the TB all the way to the goal line. You want to be able to go into their office and sit on their desk if they aren't doing their job. Important to manage this process.
Using a Title Company or Escrow Service, Potential Problem, Mortgage brokers and lenders sometimes express some concern with the Option Deposit check being made out to a third party investor and later trying to use that money as the tenant-buyer's down payment., I personally have never had a problem with this. I always ask someone who brings up this objection if they have actually had this problem before when trying to finance a tenant-buyer. No one has ever told me that they actually had this problem before., You have to understand that the Option Deposit check HAS TO BE made out to you. You are the Optionor (the one giving the Option) to the Tenant-Buyer. You can't have the Option Deposit check made out to the Seller. But regardless, this may be a problem for some lenders., Note: This is why it's so important to make sure you have a mortgage broker on your team that understands lease options and has financed tenant-buyers before. They will know which banks to go to and how to present the contracts to them so that there will be no problems., Solutions, But let's say you want to avoid this problem down the road. Can't say that's a bad idea! How do you do it?, Go ahead and use a Title Company to handle your "closings". Have the Tenent-Buyer make the check out to the Title Company, sign all the paper work there, and have the Title Company turn around later and write you a check., When you approach a Title Company and ask them to do this, you need to make sure you present it in the right way. Chances are, they have never done this before. You've got to think about the "what's in it for me?" aspect., So here's what you do..., Find an investor friendly Title Company that investors in your market use a lot. It would probably be a good idea to find one that a lot of investors are using who do short sales. Ask around at your local REIA., Tell them that you do a lot of lease options and you are looking for a Title Company that can handle the paperwork and title work for you., Tell them that you will need a Title Company that will do the following..., 1) Do a quick, preliminary title search on the property to make sure it's not over-encumbered, 2) Have the Tenant-Buyer sign all the paperwork (that you will prepare for them) at the Title Company's office., 3) Collect the Option Deposit check (which will be made out to the Title Company), 4) After the Tenant-Buyer signs all the paperwork, ask the Title Company to send a check back to you (the investor) for that Option Deposit, less what the Title Company's expenses are. (Their expenses should be less than $200 for all this.), 5) When the tenant-buyer is ready to get financing, you will want that Title Company to perform the closing at that time., 6) Ask them what they think and if they know of a better way to do it. Again - approach them with "What's in it for you". Ask them how you can make it worth their time., Why go through all this? So you can show the tenant-buyer's bank a copy of all the paperwork and an Option Deposit check made out to a Title Company and not an unknown investor., You can also use an Escrow Company - although I have never done this. I did find one that said they would do it. See the Evergreen Note Servicing link attached. Again, I have never used them, but I have heard good things about them., Another alternative - NoteWorld.com, Here are two Title Companies that I have been told will close creative deals in all 50 states. I have not called them and verified this, but you may want to call them., cleartitleamerica.com, oldschooltitle.com
Make the seller approve the tenant-buyer. Give them all the information & ask them what they think.
Tip: Make sure the tenant-buyer gets a professional inspection done on the home, or clearly waive their right to get one done. If there is anything they need fixed, you need to deal with that up front.
Tips to Give to Sellers on Managing the Lease Option Home, Consider hiring a property manager, Do ACH withdrawals for the rent on the days the tenants get paid., www.ClearNow.com, www.PayRentEasy.com, Find a local bank that won't charge you an arm & a leg, The first day the rent is late, send a "Preliminary Eviction Letter" telling them they have 7 days to pay the late rent or you will start the eviction process. VERY IMPORTANT, Inspect the property once every 1-2 months. Maybe tell the tenant-buyer (or put in the lease) that you will be the one who changes the furnace filter & check the batteries., Recommend to the seller that they get landlord insurance & home warranty
Down Payment Assistance Plan, "Don't have enough money now?", "How much do you have?", "We may be able to work with that.", "We usually require ~3% because that is what FHA is requiring now.", "How much extra can you pay per month?", "We might be able to let you make payments on the difference - like an interest free loan.", Make sure you set it up with a Promissory Note and withdraw the money on the days they get paid., Most importantly - make sure they can really afford those extra payments every month. You want to set them up for success.
Process Diagram for handling buyers who call...
Sample Buyer Video for Website, YouTube Video Link, PowerPoint Slides