How do you find sellers that are open to doing lease options?
Seems like in this slow economic market with housings not selling and buyers having difficulty in getting mortgages, sellers would be happy getting their homes sold and getting Full Asking Price.
All the sellers I’ve contacted from Craigslist, backpage and forsalebyowner want their house sold now and want cash now. They are not interested in lease purchase.
I hear people saying it’s a good market for doing lease options. Where do you find the leads to do thses type deals? Or is this market better suited for wholesaling REOs and shorts since there a lot of foreclosures? Thanks, Pete
It really is a numbers game but the things you do in your business increase the chances of your numbers being good.
Look for sellers who need to sell and you will find more deals. People getting a divorce, in foreclosure, behind on taxes, unemployed, houses that have code violations. These are the type people you should spend your time calling.
Don’t forget about abandoned, grown up property. These are great opportunities because the owners have already decided they don’t want the house!
If you need help finding these owners, let me know.
I’ve approached many FSBO and FRBO on Craigslist, Backpage, Kijiji and ForSalebyOwner with no success yet.
If you tell them “you want to buy their property” I get some interest,
but as soon as you mention lease option or lease purchase there is no interest. They say they want their house sold with a straight sale.
Or is it just reality that finding homeowners interested in selling on lease option like finding a needle in haystack, far and few in between?
If you’re being rejected time and again, it’s something in your approach. Because a homeowner in need of debt relief will be willing to listen to your ideas.
I think your problem is that , for some reason, you think that getting a lease option is the same as “homes sold and getting Full Asking Price”
From the seller’s perspective, a lease optioned home is not a home sold. It is a home tied up with very little hope of the deal ever being completed. It’s also a home where control has been lost for not much return.
If what you want is a home for yourself to live in, then look for the investors that specialize on selling homes on a lease option. Just be aware that they probably don’t actually own the home that they are selling you.
Basically, a lease option is a rental agreement on the house. So try calling houses for rent ads and ask if that house is available on a lease option. Target nicer houses because they are the most likely to be owners who couldn’t sell and decided to rent out while they waited.
To purchase a non-rental house on a lease option, you need to be looking for sellers that need a monthly income rather than a lump sum.
I get abut 4 people every week wanting to do rent to own. They are always people with very bad credit, almost no money to put down, and very weak income. I’m going to loan them $100k? I don’t think so.
So how strong is your offer? Are you offering a generous amount of option money? Is your credit good? Can you prove enough income to make the payments? I don’t know you, so this is not intended as an insult, but it is at least vaguely possible that there are lease options available but not for people with no money and bad credit.
As I previously mentioned most sellers stated they want their house sold now and cashed out now. Others say it sounds too good to be true and it’s a scam when my tenant-buyers are willing to full price and a higher rent amount for the lease option. Others worry about the deal not closing and tenant-buyers trashing their place.
We offer the sellers their full asking price, full market rent and pay their closing costs.
My tenant-buyers are screened by my mortgage broker for income, job, etc. and put in a credit repair program, so that is not a problem.
So I suppose I should contact sellers that are interested in “debt-relief and monthly cashflow”.
I agree with AJ, take a look at your approach and the words/language you are using with the sellers. If I am seeking a lease option deal, I will never mention the word lease-option or lease purchase. What I would do is I say something like – Mr. seller if you do not find a buyer, would you consider renting the property? If they say yes, then I know they will do a lease option. How? because they are already willing to sell it now and will be willing to sell in the future.
If they have reservations/concerns about renting, I will then ask them what those are and answer them. I would suggest to you, target vacant properties. If you’re targeting owner occupied homes, this could be the reason they want a straight purchase because they need the cash to move to another home. So target vacant homes or non-owner occupied homes.
So in order to not to mention lease-option or lease purchase, if I said to the Seller something like:
“Would you be willing to sell your house with an agreement to receive monthly payments for a period of time, such as 12 months, and then at the end of the period, you would be cashed out for your full asking price at closing.”
Would something like this work to approach a seller with mentioning L/O or L/P?
Peter-
I think that statement is good just make sure you can answer any seller objections on how he/she is protected in the transaction.
How does the seller benefit or is protected in the buyer coming in to lease the property. What if the tenant defaults how is that handled…??
It may not be 12 months so make sure the seller is aware it may take 2-3 yrs to qualify a buyer. Most L/O do not happen for a myriad of reasons so I would set any false expectation.
That is why I use a land trust since it protects all parties and I effectively “emulate” the L/O or L/P transaction. We give incentives for the buyer to exercise that first rite to purchase at the FMV. Depending on the financing ( if there is any equity) you may wish to push out the term to give the buyers more time to qualify for conventional financing.
The seller in most cases may wish to know how he can purchase the next home if he is moving or relocating so be ready for these questions.
Just remember to keep it simple. You’re speaking with people who are not well versed in real estate and they are looking at you to solve their problem. If someone is straddled with two payments – the house they live in and a house they’ve been trying to sell but could not, they would be open to having an honest dialogue with you.
My approach is to always ask as many questions about the seller’s situation. Why they think the property is not selling, what their concerns are about being a landlord, how much are their payments, etc…
If I see that their property is ideal for a lease option, I would say – “Mr. seller, I don’t know if this would work for you or not but what if you can receive enough payments on this house to cover your mortgage on it and without you being a landlord so you won’t have to worry about dealing with tenants, plus somebody else would take care of the maintenance so you don’t have to, is this something that could work for you?” I have never had a seller say no to this question.
When they say yes, then I walk them through my lease option strategy. Just remember you don’t want to sound like your selling a wall street investment derivative, keep it simple. If lease option does not solve their problem, don’t force it.
Very nicely said. We should learn to LISTEN and then to offer solutions to their issues. Are we going to be able to help everyone…nope. But those who show interest in our solutions are those we should strive to work with. It is a “numbers game” per se but also, like joolkano said, keep it simple.
Some people/sellers are worried about that “evil renter” destroying their house (that’s THEIR hot button).
Some people/sellers are worried they won’t make enough money on the rent to cover their monthly mortgage payments (that’s THEIR hot button).
Some people/sellers are just tired of being a landlord and getting leaky toilet calls (that’s THEIR hot button).
Some people/sellers will ask…What makes you think the tenants will actually buy the house? (that’s THEIR hot button).
It’s taken me a long time to get a better approach. I’ve gone to people who’ve been successful at doing it (like Claude Diamond, Michael Carbonare, John Jackson, etc), have asked questions and incorporated it into what I believe is successful in my area.
I was able to generate a lot of interest emailing for sale ads and for rent ads on Craigslist. Try that and any other for sale or for rent by owner listings. It is a numbers game, you may have to contact 50 before getting strong interest so don’t give up after 5 emails like most people do. And followup, they may not be interested now but their distress and motivation will only grow over time so check back in from time to time.
I used a few different approaches. I would test out a few and see what gets the best results. You may find that they may not respond to one, but will respond to another.
Direct approach - Will you consider a lease option? You can get higher sales price, down payment, higher rents, no vacancy or maintenance issues, no agent commission and much more. Contact me to learn how it will work for you.
Problem - Agitate - Soluion - Having trouble selling/renting your place? Sick of tenants, time wasters, maintenance issues, negative cash flow? Contact me to learn how to get a higher sales price, down payment, higher rents, no vacancy or maintenance issues, no agent fees and much more. And it could all take just a few days.
Get them talking - I’m interested in your home, can you tell me more about it?
Is it a common practice for investors to put their lease option tenants in a credit repair program? Do many of them balk at the idea or is that somehow a condition of the lease or option agreement?
I think you absolutely have to make it a condition of the agreement. Why would they balk? They want to purchase the home and the credit repair program will help them overcome the main challenge.
Target sellers that are not in rush to get the place sold, as they are typically not under a lot of undue pressure. These are sellers that own it free and clear (or close to), those that dont want a huge tax bill, and those that need extra income.
