Real Estate Entrepreneur, Author, Podcaster, and Consultant

What Are Wholesaling Lease Options / Cooperative Assignments?

Let me first tell you a little bit about my background.  A few years ago, I was buying a lot of homes with traditional bank financing.  When the banks started telling me that I couldn’t buy anymore homes, I started buying homes “subject-to” the existing mortgage.  Pretty soon, I owned about 12 homes within 12 months.  (And I was selling all these homes on Lease Options.)

Yes, I owned 12 homes.  I thought I was a successful real estate investor!  But I was equity rich and cash poor. I had lots of equity.  (Actually, I thought I had lots of equity… but then the market crashed!  Can anyone relate?) When you are only making $100 – $200 per month cash flow on each house, that money quickly disappears in vacancies and repairs.  All of the sudden, I had a serious cash flow problem.

I realized that I needed to fix my cash flow problem – and fix it quick.  That’s when I started wholesaling houses.  So then I started spending thousands and thousands of dollars on marketing – direct mail, Google adwords, websites, signs, etc.  I was getting a lot of leads, and I was starting to make some good money!

But then I started getting very frustrated because I was spending so much money on marketing and throwing away so many leads from sellers who were not motivated! Maybe they didn’t have enough equity.  Maybe they did have enough equity, but they weren’t willing to share any of it with me!  A lot of my leads weren’t behind on payments. There was nothing I could do to help them, and I was getting really frustrated!

So here I was – I loved buying properties and I was really good at selling them on lease options, but I had a serious cash flow problem.  And then I loved the cash flow that traditional wholesaling was giving me, but I was frustrated with the amount of time and money I was putting in marketing for wholesale deals with relatively little to show for it.  That’s when it hit me…

Why not Wholesale “Lease Options”?!  (Or do a “Cooperative Lease Option”?)

Let’s look at some facts…

1) There are TONS of sellers out there who can’t sell their home.  They either have very little equity or they aren’t willing to discount their home to 70% of ARV to compete with the banks.

2) There are TONS of buyers out there who can’t buy a house.

So I thought to myself, why not stop throwing away all those leads and do something with them?  Why can’t I put “Lease Options” and “Wholesaling” together and make the same money with them as I was making with regular wholesaling?!

So, let me give you the quick and dirty low down of what Wholesaling Lease Options are.  Here are the basic steps:

1) Find a motivated seller who wants to sell their house on a Lease Option

2) Get the property under an “Option To Lease Option” contract

3) Find a qualified tenant-buyer who has a good down payment and has a good chance to get a mortgage in 6-12 months

4) Sign the Lease Option paperwork with the Tenant-Buyer

5) Assign the Lease Option docs back to the seller.

6) Keep the Option Consideration / Deposit and give the Seller the first month’s rent

7) Put the Tenant-Buyer in a credit repair program with your mortgage broker.

8) Deposit your money & move on to the deal!

Real simple… really!  That’s why I love this business so much.  Almost anyone can easily do 1-2 of these deals a month.  Imagine what you could do with an extra $3,000 – $10,000 in “Hip Pocket National Bank” every month!

And if I can do it – anyone can!!!

Comments

  1. Hi Joe,
    I’m a newbie in real estate, unemployed and with little cash. However, after listening to your podcast with Mark Evans, I am motivated to lose my fear and move forward to do something to be in a better position financially. I would like to learn how I could do Wholesale “Lease Options” and “Cooperative Lease Option”. Would this be possible with little or no money & with an average credit score?

    Thank you!
    Mrs. Clay D.
    708-341-4245

  2. Sharon Jones says:

    Is the course available. I’m interested in something that can truely help me. I’m in a chapter 13 bankruptcy, recently divorced, and my hours are being cut at work. I need something that can work in any state.

  3. Jim Fisher says:

    Hey Joe, when will the course really be available? 🙂

    Jim

  4. Chris Williams says:

    Hey Joe, great stuf! When will your course be available?

    • Joe McCall says:

      Sorry for the delays….! I am re-doing my webinar. It will be available in the next 1-2 weeks.

  5. I’d love to see the course! I actually just want the forms. I have VAs, I’ve got sellers, a little cloudy on finding qualified buyers and the verbiage to assign the lease option – Got it all conceptually (I’m an experienced wholesaler), just looking to add lease options to the assignment mix.

  6. Hey joe will this course be up soon really need to get my hands on this very soon!

  7. Hey Joe,

    Big fan of yours, your podcasts, and your blog. Starting out in wholesaling and have been marketing out Yellow Letters and I never really thought about wholesaling Lease Options until I read this. A super simple beginner question – if you wholesale a lease option, and you assign the contract to the new tenant with the option to buy, and a year later their lease is up and they don’t want to buy the property or resign the lease… what happens?… since they only had the option to buy.

    • Joe McCall says:

      Usually, you just renew & extend the lease – if they want. If I am wholesaling the lease option, I am no longer involved. It is between the seller and tenant-buyer to figure out. I am willing to help if they want my help. I just normally advise to extend the lease.

  8. Hey Joe,

    Big fan of yours, your podcasts, and your blog. Starting out in wholesaling and have been marketing out Yellow Letters and I never really thought about wholesaling Lease Options until I read this. A super simple beginner question – if you wholesale a lease option, and you assign the contract to the new tenant with the option to buy, and a year later their lease is up and they don’t want to buy the property or resign the lease… what happens?… since they only had the option to buy.

  9. Hi Joe, question about wholesaling lease options. When putting a tenant buyer into your seller’s house, aren’t you basically turning your, potential seller into a landlord?

    • Joe McCall says:

      Many times, the seller has already accepted that they are going to have to be a landlord. They don’t know of any other option. They want to sell their house, but they can’t. So they’re going to rent it, like a regular rental, to a regular tenant. But now with a lease option, they are renting their property to someone who wants to BUY it. Big difference.

      Does that make sense? No one is forcing them to be a landlord. This is just another option. Plus, many times, I am staying in the middle. I am the landlord. Those are the best deals.

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