Wholesale Lease Options
Homes for the Un-Lendable
By Alicia Cox
CashFlow University
What is Wholesale Lease Options?
It’s “Lease Options” and “Wholesaling” put together where you make the same money with them as you would with regular wholesaling!
Millions of Americans who are being told that they are “Un-Lendable” by the banks, this is where you come in…you will give them a chance to become homeowners!
This strategy helps the Seller to net 100% of the current value of their property, not the 40-70% as in a wholesale investor deal. They would only net 80-85% by selling through a Realtor.
This strategy also helps people who want to own a home but cannot qualify for a mortgage loan right now due to credit issues.
These buyers would actually qualify a year or two from now, they have a decent income, a good rental history, and money set aside for a down payment.
There are so much more of these qualified lease option buyers now.
Since the mortgage crises, millions of people have lost their homes to foreclosure and are not able to purchase another home right away.
They need a house not an apartment to accommodate an expanded family and pets.
How to Find These Deals
Look for leads with little or no equity.
When marketing for sellers you’ll get a lot of different types of leads that come across your desk. High equity deals, low equity deals, no equity deals and upside down deals.
For properties that have little to no equity, which are the majority, wholesale lease options is a better strategy to structure little to no equity deals and turn them into profits.
Flipping L.O.’s can be a good way to start out or to add to your investing toolbox.
There are a ton of people that can’t sell their house, especially the nice ones, without taking a big hit on price. A Lease Option is a MUCH better choice than simply renting it out.
On deals that are good lease option candidates, I get them to sign up, then pass them off to a partner that handles all the marketing and displaying of the homes.
Here’s how it’s done:
-Negotiate L/O with seller (Sign option and lease contract)
-Find tenant buyer (Assign option contract and sign new lease)
-Close and deposit check!
Here’s the expanded version:1) Find a motivated seller who would sell their house on a Lease Option
2) Get the property under an Option To Lease Option contract
3) Find a tenant-buyer with a good down payment and who could qualify for a mortgage in 1-2 years.
4) Pass the Lease Option paperwork to the Tenant-Buyer by Assigning your interest.
5) Keep the Option Consideration / Deposit and give the Seller the first month’s rent
6) Put the Tenant-Buyer in a credit repair program with your mortgage broker.
7) Deposit your money, rinse and repeat!
That’s the overall process. Some assign back to the seller vs. to the tenant buyer, I assign to the buyer which I think is much easier and cleaner.
Marketing for Wholesale Lease Options:
Marketing is the key to finding these and any other types of deals.
You are trying to find both for motivated sellers & qualified tenant buyers.Here’s what you should do to get both leads:
1) Cold Calls: For Rent By Owner ads (FRBO) & For Sale By Owner ads (FSBO)
Find them on CraigsList and local newspapers
2) Direct Emailing: Send an intro email requesting info and keep emailing every week
3) Text Messaging: Text the person for “status” of the house for rent.
4) Voice Blast: Use a service to send a direct message to the phone number listed in ad
5) Referrals – (You’ll probably get more of your deals from referrals)
Tips to get your deals accepted.
Make your agreements with Sellers non-exclusive, which means they can sell the house on their own if they want and that will put the Seller at ease. You’ll win a lot of deals because of this. They’re getting a free, qualified, better quality tenant through you. The Seller will want to know “What’s the catch? It doesn’t cost me anything? I can cancel anytime?” You want to make it extremely difficult for them to say “No”. Don’t worry, they most likely will not sell the property on their own, but if they do – well think of it as the cost of doing business.
The key is to focus on what’s in the best interest of the Seller. When your sellers realize this, you will win more of their business.
It’s all a numbers game! Do more marketing, if you want more deals. If you want to do 3-5 deals a month, you should probably be talking to 5-10 sellers a day. And you will probably need 10-30 homes on your website.
Sounds simple… uh! That’s why I’m so excited about this business, just add lease options to the assignment mix and work these quick deals to fill in between your bigger deals. A total newbie can easily do at least 1 of these deals a month. Imagine what you could do with an extra $3,000 – $10,000 this month!
Mine will go into my Hip National Bank account!See how profitable this part of the business could be?