Real Estate Investing Facts

The Top 3 Ways to Find Lease Option Tenants and Buyers
By Foreclosures.com, Wendy Patton – 2010

As you know, I’ve been doing Lease Options for many years now. I’ve seen down markets, up markets and everything in between. Having survived all kinds of markets I can tell you I LOVE doing Lease Options in down markets. Why is that? Because there are SO MANY deals just waiting for me. In a down market the motivated sellers are plentiful. The common misconception when the media is screaming about how bad the market is, is that there are no buyers out there. That is true. There are fewer buyers in a soft market. Does that mean it’s impossible to find them? Not at all.

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Let’s take a look at some ways to find Lease Option tenants and buyers in soft markets:

1. First, is the asking price. If your asking price, either the sale asking price or monthly rent asking price, is too high for your Lease Options, you’ll scare away most buyers. Yes, it’s common that on a Lease Option the rent and purchase price are marked up due to the flexibility you are offering the buyer. However, if the market is soft you’ll find these marked up margins shrink. This especially applies to the monthly rent. If you are asking too much for rent you will have a VERY hard time finding tenants. If you want to place a quality tenant quickly make sure the rent is competitive, maybe even slightly less than the competition

2. Second, think long term. If you have structured a longer term Lease Option deal with the seller, like 3 to 5 years, consider just renting the house initially. Rent the house out for the first couple of years before you try to place a Lease Options buyer. This will give you time to weather the soft market and start moving towards rebound. If you get stuck with the mindset of only looking for Lease Options buyers you’ll be following the herd, trying to sell in a down market. Just rent the house in the down market and try to sell it when the market picks back up.

3. Third, cover your cash flow. If you put together a great Lease Option deal and have it start right away, who covers the monthly rent until you find a tenant? News flash:

What just happened? You became a motivated seller! You are much more likely to make a bad decision in Lease Optioning that house than if you didn’t have to pay the monthly payment. You are also reducing your profit margin for every month the house sits vacant. Instead, structure the deal to give yourself some time (a few months at least) to find the buyer or tenant. You could even have the Lease Option begin only once you have found a tenant. Be fair to the owner and let them continue to try to sell their home on their own during this time.

Taking all of this into account I think you’ll see why I LOVE to find Lease Option deals when the market is soft you’ll find it easy to get the kinds of deals you really want. Then if you structure the deal with strong terms and use the selling techniques I talk about, you’ll be selling when the market has improved and find it a whole lot easier to move your properties and make handsome profits.

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