We’re winners around here, right?
Well, it’s not just us… everyone we work with should also be a winner.
In my book — Wholesaling Lease Options — I talk about win-win-win deals. You should make every effort, with every deal, to be sure that the participants are winners when it’s done.
Whether you’re doing lease options or short sales or wholesaling or rehabbing… with sellers, landlords, cash buyers or realtors.
If you really want to stay in business for a long time and have a good reputation, you need to set up your transactions so everyone wins.
So, specifically for lease options… oftentimes, sellers are in a bind, and a lease option truly is the best option. And, the tenant-buyers benefit because they lock in a good price on a desirable property. That’s where the triple win comes into play. You, as the investor… plus the seller and tenant-buyer.
One of the biggest mistakes I see is when investors don’t care if the tenant-buyer gets financing or not, just as long as they get in and out as quickly as possible. I don’t think that’s the right attitude to have. It’s yucky and not good business.
First, let’s talk about the sellers…
A lease option is good for sellers because they get to walk away with more money than if they’d sold it with a traditional realtor.
Remember, a lease option does not work for every seller or situation.
But! There’s a lot of sellers who own rental properties and just aren’t made to be landlords. They don’t want to be a landlord, and they have some motivating factors:
- Maybe they had a job loss or job transfer.
- Maybe they got a divorce.
- They moved out of state and now they have a rental property that they’ve tried renting out before and it just doesn’t work.
- It’s really hard to find good property management.
- It’s hard to find good tenants.
- Some people just don’t have the time to manage properties properly.
You get the idea.
With a lease option, they can rent their house to somebody who wants to buy it instead of somebody who’s just going to be a typical renter who calls them every time the faucet leaks. :-/
Why not rent it to a tenant-buyer who will fix the faucet on their own right and have more of a homeowner’s mindset and mentality? And, because the tenant-buyer puts a lot of money down — and that money’s nonrefundable — they have more vested interest in the property.
So, from a seller standpoint, they want to sell the house, but maybe they can’t because there’s not enough equity in it. Maybe they can’t make another payment on a second house. They can’t do 2 mortgage payments. They’re tight as it is.
With finances, if there are 1 or 2 months of vacancies, it could literally put the homeowner into a lot of financial problems… on top of them possibly not wanting to be a long distance landlord.
That’s when a lease option might be a good alternative. And, for some sellers, it might be the least worst alternative.
See, if a seller is going to sell a house, traditionally with a realtor, there’s a lot of costs involved. They’ll have to fork over anywhere from 10% to 15% of the list price when they sell with a realtor. And the seller may not have enough room in their price for that.
Or let’s say the seller has been a landlord. Maybe the cash flow isn’t as good as they thought it would be. Maybe they’ve been through 2 or 3 tenants and it’s stressing them out and they’re sick and tired of it… but they don’t want to sell the house because they’ve got a lot of money tied up in it and they would lose the money.
So, a lease option would be a great option (see what I just did there, option/option, I digress…) because they can get a tenant-buyer in the house, who’s going to take better care of it, and the seller won’t have to deal with them. (Just make sure you always prescreen your tenant-buyers!)
It’s also good for the seller because the tenant-buyer is going to buy it eventually.
So, lease options can really be dreams come true for certain sellers. And many of them don’t even know it’s an option until you present it to them.
Okay, so that’s how the seller wins. In my follow-up email, I’ll cover how lease options are wins for the tenant-buyer and you as the investor.
But remember, whether lease options or some other kind of deal — always set them up for everyone involved to win.
If you do that, you will stay in business for a long time, and you’ll do a lot of deals because your reputation is very important in this business.
So, take your business seriously, treat people right and you’ll always be profitable.