Lease to buy option strategies...

[Jared]

Anybody out there starting off on lease options and looking to bounce ideas off someone else?

I have property investments but very new to creative techniques

Would appreciate any advice to get started on this road...

Very keen to chat about deal structuring and profit potential with lease option to buy and back to back strategies


Jared

 

[Sunfish]

I'm not dobbing anyone in, but we have a regular here who may wish to explain how "creative techniques" work re tax schemes.

You may google "rent to buy" or "wrapping" to learn more.

 

[Jared]

Thanks Sunfish..

I think I know the basics about the sandwich option and the like..

Just want to know more about its implementation..

Have you ever done one of these?
Do you find tenants/vendors pretty easily?
Was wondering if you have secured the property with the vendor on an option to buy, and you find it hard to sign up a 'lease to buy' purchser..is there a way out?.. or are you still committed to paying the rent to the vendor?

 

[travelbug]

I listened to Mark Rolton talk on this. He makes it sound very easy but a few people spoke to said it's not that easy. Hours and hours sourcing properties then no go.
He has a chapter in the new "Think and Grow Rich in Property" book but I haven't read that chapter yet.

Search "Options" on here - there was a thread on it somewhere.

 

[blaster]

I believe it certainly isn't that easy . These guys have more front and gaul than Myers and personally I think that has to be your make up for that game , along with a very thick skin .

I have done two myself , one back fired and the deal I had to offer was so good that potential buyers were suspicious and I couldn't sell. Time ran out eventually and I lost the deal , it was one very nerve racking 6 mths let me tell ya.

The second one was sort of accidental but again I found that although I had a great deal on offer , again people were suspicious of it and I ended up taking another option.

I'm not saying they don't work but I came out of it feeling that stuff was extremely nerve racking and risky to , as you put so much time into the deal , a real waste if it doesn't go well .
Perhaps like set up in a more professional manner would help rather than the one off look but youknow .

I think along with the above , being a very patient and good communicator is probably the key as there is allot of wangling and allot of people you need to put at ease .

Cheers

 

[Andrew'nTrina]

Hi guys

We're actually in a house at the moment that we bought under a rent-to-buy, or lease option.

We've sold a few houses using wraps, and had paperwork done for a couple as rent-to-buys, but they fell through and we ended up selling them as wraps as well because they just work better for us for our goals.

We haven't pulled off any sandwhich leases yet, but we're getting closer every week.

From the dozens of people I know who do it full time, they certainly think it's easy! It really is a skill set that you have to develop. I find vendor finance properties really easy to sell these days, but hard to buy. I also know a few people who think it's the other way around. Certainly a year ago I didn't find selling a house under a wrap easy, and I'm guessing that in another year I'll find buying them under a lease option or wrap easy as well.

However, I must say I don't look at it as being nerve racking per se. I like to think of it as a journey with a destination that I will absolutely get to. I don't get emotionally involved with the deals I'm trying to put together, so if one doesn't work I try and work out why and be better next time.

I certainly wouldn't say I have lots of front and or gaul, and I certainly remember being at a stage where I didn't want to call sellers, and I wouldn't answer my phone if I thought one might be calling!! lol

Katrina has had some buyers abuse her on the phone because they didn't see how a rent/buy could benefit them, so I guess sometimes you're going to need a thick skin. I've never been abused by a seller, but then maybe I'm offering them too much money! Our first step with sellers is always building rapport, because it's going to be a lot easier to get them to do business with us if they like us.

The biggest factor however is convincing yourself that it's the way to go. If there's any doubt at all in your mind, then you have no hope in hell of convincing other parties that it's the way forward for them.

Oh, as for securing a seller and not finding a buyer, there are a few ways around that. The general idea being you get them to give you a time frame of a couple of months to find someone, but they are still allowed to sell it the normal way in that time. It's rare to lose a property this way, especially once you work out how to sell effectively. Personally, I'd never put an offer in for a lease option that wasn't good enough for me to keep and just put a tenant in if worst came to worst - however not everyone's got the cashflow for that.

If you look at it the right way, there is a huge market for this kind of stuff. It is now harder than ever for people to get a bank loan, and Glenn Stevens is talking about the next speculative property bubble. There are tons of people out there who need a house now, and can't get a bank loan. There are nowhere near enough people doing what we do to keep up with all the demand.

Hope this helps.

Andrew

 

[blaster]

Hi guys

We're actually in a house at the moment that we bought under a rent-to-buy, or lease option.

We've sold a few houses using wraps, and had paperwork done for a couple as rent-to-buys, but they fell through and we ended up selling them as wraps as well because they just work better for us for our goals.

We haven't pulled off any sandwhich leases yet, but we're getting closer every week.

From the dozens of people I know who do it full time, they certainly think it's easy! It really is a skill set that you have to develop. I find vendor finance properties really easy to sell these days, but hard to buy. I also know a few people who think it's the other way around. Certainly a year ago I didn't find selling a house under a wrap easy, and I'm guessing that in another year I'll find buying them under a lease option or wrap easy as well.

However, I must say I don't look at it as being nerve racking per se. I like to think of it as a journey with a destination that I will absolutely get to. I don't get emotionally involved with the deals I'm trying to put together, so if one doesn't work I try and work out why and be better next time.

I certainly wouldn't say I have lots of front and or gaul, and I certainly remember being at a stage where I didn't want to call sellers, and I wouldn't answer my phone if I thought one might be calling!! lol

Katrina has had some buyers abuse her on the phone because they didn't see how a rent/buy could benefit them, so I guess sometimes you're going to need a thick skin. I've never been abused by a seller, but then maybe I'm offering them too much money! Our first step with sellers is always building rapport, because it's going to be a lot easier to get them to do business with us if they like us.

The biggest factor however is convincing yourself that it's the way to go. If there's any doubt at all in your mind, then you have no hope in hell of convincing other parties that it's the way forward for them.

Oh, as for securing a seller and not finding a buyer, there are a few ways around that. The general idea being you get them to give you a time frame of a couple of months to find someone, but they are still allowed to sell it the normal way in that time. It's rare to lose a property this way, especially once you work out how to sell effectively. Personally, I'd never put an offer in for a lease option that wasn't good enough for me to keep and just put a tenant in if worst came to worst - however not everyone's got the cashflow for that.

If you look at it the right way, there is a huge market for this kind of stuff. It is now harder than ever for people to get a bank loan, and Glenn Stevens is talking about the next speculative property bubble. There are tons of people out there who need a house now, and can't get a bank loan. There are nowhere near enough people doing what we do to keep up with all the demand.

Hope this helps.

Andrew

Interesting stuff , thanks for the input Andrew.

Cheers

 

[ryan_mel]

The biggest factor however is convincing yourself that it's the way to go. If there's any doubt at all in your mind, then you have no hope in hell of convincing other parties that it's the way forward for them.

Just as what I heard from some MLM meetings that, you have to believe what you are doing/selling before trying to persuade others to follow

 

[Plodder]

Interesting that you would pick that little bit out of such a good post to repeat! What about the bit where there are so many people out there wanting home ownership and there are not enough of us doing this to help them all. There are also lots of people with investment properties that owe them more than they're worth, that are taking a hit by selling them just to get out of their pain.
This process allows them to sell without ending up with a residual debt at the end so to me that would be preferable to a sale now with a loan to continue to pay!
I thought Andrew explained it extremely well that there are benefits to both buyers and seller for these transactions. Many people don't have the type of income that banks require any more so they are out of the loop when it comes to bank finance. Not to mention the fact that they can't save much for a deposit!
I have done quite a few myself too, and I firmly believe in giving people an opportunity to get out of the rental market and get some security behind them.
I love the fact that opportunities like this can be discussed on this forum so that people can realise that there are other good ways out there to buy a home or investment property.

 

[Savanna100]

Andrew and Trina, a great explanation.... I went to the Rick Otton Course in 2008 but havent actually tried anything yet. I'd really like to and now that I'm not working at present, I may give it a go...thanks for a very informative and encouraging post on this topic.

 

[TamarG]

We've been doing vendor finance deals for a long time...

Hi all,

My partner Jack and myself have established a very successful full time business since 2003 doing vendor finance deals. There is indeed a big demand for this type of finance especially as, now more than ever the banks have tightened up their lending . In fact you can't even get lo-doc 80%LVR loans anymore.

Our model is that we help homebuyers who can't get a bank loan buy their home by doing joint ventures with investors who can. We have a set mark up that we tell them in advance i.e. you paying for the finance as well as the house and so all is transparent. If they're not comfortable with that it doesn't proceed. But most understand that and are grateful for the opportunity.

Investors get great positive cashflow right from the start (b/w $500-600 per month), our buyers get a house of their own choice and of course we make money as well! A win-win-win situation.

And we do offer to show our investors the ropes should they want to learn how to do this themselves....

Cheers,
Tamar

ps We prefer wraps to rent to buys because, as well as getting more deposit upfront, homebuyers are more committed to buying than rent to own where there can be more of a "try before you buy" attitude

 

[tobybarton]

Options

I'm new to property options and was inspired (like so many in this forum) by Andrewn'Trina post. It's amazing how far a little bit of positivity can go, even a few years down the track. I'd be interested to see how you guys are going today!

I have stumbled across the Massland Real Estate University site www.residentialdevelopers.com.au

that seems to document a lot of successful lease options - with profits in the $500,000 range!

I'd me interested to hear of other's experiences with seminars or JV options.

Toby

 

[Kent Cliffe]

I personally have looked into Lease Options as an alternative way of securing property. I can say upfront that it is no walk in the park. To prospect for willing vendors is quite a challenge as the biggest issue you face is people are always suspicious of these types of deals. It is essential that you have an effective way to educate people how it all works.

To look for my sources I used to call the papers private landlord section asking if they would be willing to sell it to me in the future. Most people agreed, however they didn’t want to put anything on paper. So for every 25 – 50 calls I would get about 1 meeting. Another way is direct marketing mail outs.

The problem I had was, the landlord would be in the mindset that they were planning to hold for eternity or it was their private home and they were doing it temporary (this I often found out at the pen to paper stage). The most success came from people who had the property listed, couldn’t sell and decided to rent it out until the market improves. It is a great counter cyclical strategy. This gave me the idea to call owners direct who had been listing their property for 3 months (after the listing agreement expires).

This strategy was a little successful, but the time invested to securing a willing vendor was impossible for me. (This is where my personal journey ends – not saying I wont try it again…)

(This is where the experience of a close friend of mine starts) So after securing a property, his plan was to on sell it is as a lease option and make a spread. He ran into a very similar dilemma on the sale side, educating prospective buyers.

In all technicalities of the word, you can’t advertise the “house” as what you are buying. You are advertising the lease option. You aren’t the owner over the house and you don’t have a Triennial Licence with a Listing Agreement. So be wary there (he found this out after he used a private sale website to advertise the property on RE.com.au)

In order to sell it he had to sweeten the deal for the buyer. So he ended up loosing a bit of profit in the deal (however better then nothing). In the end he did on sell the option and did make some money out of it, but afterwards he had to manage rental payments and all that fun stuff.

He thinks that the project wasn’t a great investment for the time involved, contrary to what many companies say, albeit he did make a profit.

I have seen another guy do it quite well where he would purchase the property on a 2 year lease option, rent it for 1 year, then gut and renovate the property. Giving him 9 months to sell it (bit of capital risk). The renovation as well as the CGT saving made the time involved more profitable – the lease options just secured him a pipeline of renovations.

 

[Caroline Edson]

Thanks Sunfish..

I think I know the basics about the sandwich option and the like..

Just want to know more about its implementation..

Have you ever done one of these?
Do you find tenants/vendors pretty easily?
Was wondering if you have secured the property with the vendor on an option to buy, and you find it hard to sign up a 'lease to buy' purchser..is there a way out?.. or are you still committed to paying the rent to the vendor?

Jared we have done a number of Rent to Own/Lease Options in Mackay & I would probably say if you have not undergone relevant training to be comfortable with this process of procuring properties & assisting a seller to get the right buyer in place you need to do this first. It will give you the background you need to ensure confidence when you talk to prospects both buyer & seller alike.

Also make sure you align yourself with good legal representation to assist with putting the correct paperwork together for your state that you are working in.

In regards to if it is hard to find a purchaser do you still have to pay the vendor you need to address this with each person in kind & have this agreement notated in your legal documents.

Hope this helps.