Are you interested in learning how to do a lease option on a junker property?
Ok, this is a cool real-life deal…
So, this house was worth about $320,000 fixed up. It had 5 dumpster loads of junk inside that needed to be hauled out. And, there was some termite damage, it needed a new roof and some cosmetic updates. About $40,000 in rehab costs.
The guys doing the deal offered the seller $240k.
But, what if the seller owed $280,000 on that house? Well, obviously no wholesaler is going to give that seller $280,000. Because if you put $40,000 into it, you’ll be all in for what it’s worth, and you’ll have no room to make any profit when you sell it.
So then, how’s about a lease option deal?
The guys said to Mrs. Seller:
“Listen, we’d have to be at $240,000, you want $280,000, we don’t think we can make that work. And, we don’t know if this will work for you… but what if we, or one of our buyers, could lease the property from you and we fix it up, and we’ll make the payments every month, and then buy it in a year or two. And you won’t have to pay any realtor commissions and all that stuff. That wouldn’t work for you, would it?”
See how they sold the benefits of a lease option and phrased it as a question? Smart! That’s exactly what I teach.
Well, Mrs. Seller said, “Yeah, that might work.” So then, the guys worked on selling it as a handyman special lease option.
And let me just say that every time I’ve done a handyman special lease option on a house, I’ve gotten flooded with phone calls. Those things sell like hotcakes!
Why?
Because there’s a lot of self-employed contractors… people who can fix up houses themselves who’d love to do a rent to own on a property. They can fix it up, put the flooring they want, with their paint colors, do the kitchen, bathrooms — everything the way they want it. And then while they’re working on getting their credit up to par, they can actually get a mortgage in a couple of years.
Back to the numbers…
So, the guys doing the deal offered the seller an option contract and leased it from her for $280,000 at $1,700 a month in rent. They knew they could rent the property pretty quickly for that amount because it was a little below average market rents.
While the house doesn’t have much equity in it, a contractor can get in there and do the work themselves for $15,000–$20,000 in materials — and they don’t have to pay for labor because they’re doing it all themselves.
Smoking hot deal for them at a bargain price, right?
So the wholesalers advertised the lease option, knowing they could easily get $5,000–$10,000 from a tenant-buyer. They’d sell their lease option contract to the tenant-buyer, and then they’re done and out of the deal.
Of course, when they structured the deal, they made sure the contract included details about what would get fixed up in the house, info about permits, inspections, etc.
Genius strategy.
I’m telling you, so many other wholesalers would have just thrown away that property because it needed too much work and there wasn’t enough equity. And they pass on those deals.
But, now you know better…
You’d offer a lease option and sell that contract — walk away happy with a fatter pocket of dough.
Go find a junker to lease option!
