You know I love lease options. All day every day.
But, there’s a misconception that they’re complicated. So, I created a 1-page document with each of the steps. My point is: If I can teach you how to do them from just 1 document, that shows they are not complicated.
Quick recap:
Step 1: finding motivated sellers with marketing
Step 2: talking to sellers and asking a lot of questions
Step 3: Send offers with credibility kits
Let’s move on…
Step 4: getting the contract signed
My contract is a simple 1-page agreement.
So, when you’re negotiating with a seller, the cool thing about lease options is that you can negotiate several different things, like:
- price
- terms
- rents
- down payment money
- seller concessions
For example, you could say: “Well, maybe I could get you your asking price if I don’t have to put anything down on it.” Or, “I’ll give you the price you want and the rent you want, if you give me 100% rent credit every year for 5 years.” (Rent credits give the seller some comfort to know that you have a big incentive to pay the rent on time.)
So, if the seller is stuck on their price, you can give them the price they want if they give you the terms that you want. It’s a beautiful thing.
That’s what’s great about lease options… as long as you’re willing to listen to the seller and be patient and understand their pain, and be committed to working out a deal that’s going to work for them and you — then everybody wins.
Look, there is power in negotiating lease option deals in such a way that all the players involved win. That’s super important.
So this agreement I’m talking about is not the final contract. Why? Because when I find a tenant-buyer, there will be more paperwork we have to sign. And I make sure to tell that to the seller.
But, I don’t tie up the property either, unless it’s a sandwich lease option and I’m going to stay in the middle. I’m not going to tie it up because if I can’t find a tenant-buyer, I just won’t exercise my option — it’s actually dependent on me finding a good tenant-buyer for the property.
Now, what does that mean — not tying up the property?
So, if the seller sells it or leases it on their own before I do, they can cancel my contract and they won’t owe me anything. I do lose some deals that way, but I actually win more deals because of that — because it takes away the risk from the seller.
You’ve got to remove risks for you too. You should never be obligated to start making mortgage payments while you are finding a tenant-buyer to live in the house. Once you find a tenant-buyer, then you’re locked in and responsible for maintenance and repairs and vacancies.
But again, the great thing about lease options is you can pass those responsibilities on to the tenant-buyer. And, a tenant buyer puts enough money down upfront — you should be saving at least half of that, so if there is anything in the future that’s unforeseen, you’re covered.
One more note about this: On a lease option assignment, the seller signs the assignment agreement as well. What that means is that the seller gets the final approval on whoever’s in the house.
Remember, when you’re doing your contracts with the sellers and with the tenant-buyers, ALWAYS set it up as a win-win-win. Everybody should win.
I’m telling you, lease options are the best deals to get started with and why I continue to do them over and over and over again..
Step 5… marketing the property is next. Woohoo!
