Okay, so I’ve been focusing my emails recently on steps in a lease option deal. I wrote it all out on just a 1-page document — because it really isn’t complicated.
Step 1 is finding motivated sellers with marketing. Step 2 is talking to the sellers and asking a lot of questions.
On we go…
Step 3: Send the offer
I send an offer to every single seller I talk with. Even if they say, “No, I’m not interested,” I still send them an offer with a cover letter that says something like:
“Hey, it was great talking to you about your house at 123 Main Street. I know this may not be the right time for a lease option for you, but circumstances change. I’d love to talk with you later.”
Remember, most sellers are going to say “no” on the first call. Whether you’re doing lease options or wholesaling or any strategy, it’s just the way it goes.
So, depending on the lead’s motivation, I change up offers: could be a sandwich lease option offer, a cash offer, a lease option assignment offer, owner financing offer, or even all of those types of offers.
A cash offer is at .60-.70 cents on the dollar. I keep it super simple: 60% or 70% of Zillow. Sometimes, I’ll just take the average of Eppraisal and Zillow, and multiply that by 70% minus repairs based on what they told me, minus my wholesale fee of $10,000.
I do the cash offer knowing they’re likely not going to take it — but that positions my sandwich lease option offer so much better.
For the sandwich lease option offer, take the as-is value times 85%, and I also give them rent of about 75% of whatever the market rents is. If market rents are $1,000 bucks, I’m going to give the seller $750. And the sandwich lease option means I’m going to manage the property, take care of maintenance, repairs and vacancies.
I remind the seller:
“By the way, if you were to sell this house with a realtor, and the realtor makes your mortgage payments for you while the house is vacant, will your property manager fix things for you when the tenant complains about something that needs to be fixed? No? Well, I will.”
A sandwich lease option offer could be very attractive to a seller. They can get the benefits of owning a rental property without all of the landlord headaches and hassles.
I do get this question a lot: Why would a seller ever want to do a sandwich lease option and not just a wholesaling lease option?
Simple — because of the convenience of it.
Let’s say the house is worth $150,000 and they owe $100,000, but they’re not willing to discount it. And, they don’t mind managing the property themselves. So they say “no” to my sandwich lease option. Well, then I’m going to offer them a wholesaling lease option offer of $150,000, then turn around, bump the price up and sell that contract to a tenant-buyer.
This is important: For all of these offers — I send them to sellers in an email and in snail mail.
Because an email can easily get lost or go to spam. They may look at it and think, “Ok, I’ll look at it later.” And then never open it again or can’t find it. Then 3 months later, after I’ve been following up with them, they go into their folder and they say, “Oh, here it is. Yeah, this might work. I might be interested in this.”
And, I include my lease option credibility kit PDF too. It has a simple cover letter, then the different offers, and a letter of intent.
But! I do NOT include the wholesaling lease option in that letter of intent because I don’t want the seller to think that’s one of their options. I want to try to get the sandwich lease option, so I can make more money on the deal. If they say no to that, then I’ll do the wholesaling lease option offer.
Also in my kit is a note that explains what at least option is and lists the heavy benefits of why a seller would want to do a lease option. Then, FAQs explaining and answering the most common objections to a lease option.
The last page is references:
- property manager
- loan officer
- mortgage broker
- title company
- insurance agent
- anyone you’ve done business with the real estate industry
These credibility kit PDFs are quickly created in my CRM: REI Simple.
Then make sure you schedule when to follow up. Cold leads = 3 months later.
Hot leads = the next day. And, on my call with them, I give them 2 options of when we can talk again, and let them choose one of those times. If they are serious about doing a lease option, I send them the offer with a deadline attached to it.
So, that’s step 3: send offers!
And remember, you should be talking to 5 sellers a day, which means you can send 5 offers a day. Do you think you might do a deal after a few months of that?
Let’s say you’re doing this 20 days a month. That’s 100 sellers you’re talking to, and maybe just 80 offers — after 3 months, you’ll have sent 240 offers. Do you think out of those 240 offers, 1 of them might turn into a deal, and you make $30,000, $40,000, $50,000 grand on it?
Especially if you’re consistently marketing and consistently following up. Eventually, you’ll get a VA that does the follow up for you and lots of other things too. So, you’ll be sending even more offers out then.
Look, just do what your competition is not doing. Your competition isn’t talking to 5 sellers a day. They’re not making offers to every single lead that comes in. They’re not following up with sellers. They’re not sending offers in the physical mail.
You (or your VA) do ALL those things and you will do deals.
I’ll leave you with one final thought…
Pro Tip: I only do lease options on nicer homes, never on junker homes.
Next step: giving the seller a contract to sign. Good stuff coming!