Buying and selling houses is easy. You just go the the agent’s office, sign a few documents and then contact the bank. 30 days later you have a debt and a house! Its easy.

So why do most investors fail? They fail to set up a system that keeps breathing cash for them instead, even when they have no money to keep coming up with deposits.

May I suggest to you that for every property you buy, you ‘control’ another to make repayments for you? How? Well, if you buy a property for say$300,000 then rent it out, you will find you are short each week by $100. That is the difference between the rental coming in and the mortgage going out each week.

Ok, so how do we set this system up to make up the shortfall.

Lease Options.

Everyone understands a Lease. Most people have rented a property so you know your obligations and responsibilities. You pay a rental bond. You agree to pay the rent on time, when it is due. You also know how easy it is to stop the lease agreement too. You just give notice and usually you get your bond back minus any cleaning bills.

Options are used in the big end of town when people want to control things that they either don’t have the cash for, or are waiting for council or government approval etc. They give the option holder the right to buy something at a predetermined price in the future.

So when thinking residental real estate investing you need to get you head around controlling assets and not buying them. We all want the benefits from the real estate, but not the obligations of paying for it; Lease Options are a great tool to do just that.

You need to negotiate with the vendor or agent what price they would like to ’settle on’. Once you have that figure you can work with what the rent will be each week. You then need to work on a term or time frame for both the lease and the life of the option.

A great example is a house I offered a lease option on yesterday. Its a $1.5 Million Dollar canal front house, here on the Gold Coast, and would be worth $1.5 Million all day long. I said that I will pay the amount equal to the mortgage obligations per week. The vendor was happy because I had taken away the pain of making repayments for him. Next we worked on the term of the agreement. We both think that 24 months will be a good starting point with the possibility to extend after that. I said I was happy to pay $1.3 Million for his property either before the 24 month agreement ended or at the end. He countered with $1.35 Million. I could have asked for all the rent going to him to be taken from the $1.35 Million when I settle on the property, but I thought I had done quite well so far.

You can see I have a few directions I can go from here:

1. I can go and get bank financing and buy the house now and likely realise a profit of $150,000 fairly quickly.
2. Let the rent from the tenant cover my obligations each week.
3. Sell the deal to an investor who will cash me out of it today for the right to collect into the future.
4. Sell the property on to a family who is looking to try before they buy. In other words, a Lease Option themselves.

Most property solicitors understand Lease Options as they are simple and it’s easy to advise their clients. I like them because there are no banks involved.

These Options can take all sorts of directions and will increase your wealth ten fold in no time if you do it with integrity and honesty. Make your vendors happy that they can sell what they want and get relief from payments and the headaches of tenants.

On a side note, you will find your potential buyers like the lease options as they cannot be traced by solicitors and lawyers. People going through divorces or marriage disputes can get into property without their partners knowing about it, and therefore cannot do much about future profits or benefits realised. We don’t really need to know, but its just life!

Lease Optioning the World

Don Christie

Last 5 posts by Don Christie

• Coffs Harbour Vendor Financed House Stop Renting!
• Rick Otton's Massive Passive Property Pack Review
• No Bank Qualifying, Vendor Will Finance Buyer into 3 bedroom House
• How to Find Great Deals in the Area you Want
• Flipping Success: Making a Living from Fixing Up Houses!

[ Add Your Comment ]