I am finding it harder and harder to find anyone that will be able to put option consideration money down for a lease option. they either don’t have any money because of the economy or they don’t want to put that much down because it would liquidate there savings? any solutions or ideas to get tenant buyers to give out at least 3% of the purchase price for option considerations?
Having the same problem. I thought about having them make me out a separate monthly payment. I’ll probably just wait until they get their income tax return and wait it out until then. Herbster
the only problem tenants i have ever had were tenant/buyers where I financed their downpayment. The only tenants I have had trash a house and leave in the middle of the night are ones where I financed the down. The only tenants i have had to evict, were financed on the down? Not every one I have financed has gone bad, but the statistics are not good. Guess what i will never do again?
In my opinion, when you finance a down you are setting them up for failure. Their credit probably stinks because they cannot afford their current bills, and now you are adding to that mess. Not a good situation.
I agree with tlance. The few times I have financed option money it has usually led to problems. If a t/b doesn’t have the money upfront, you really don’t have a t/b, just a tenant.
In today’s economy you need to be realistic with what you can expect to receive and adjust your sights accordingly.
I agree with tlance, that if you finance the down payment that you are setting them up for failure. Typically they will look at the property more as a renter than an owner if they have no skin in the game.
Question I have is what are the marketing techniques you are using to find your tenant buyers? Are your marketing pieces targeting the correct people? and saying the correct message?
Have you talked to Realtors, Brokers, Lenders, Property Management companies, other Real Estate Investors to see if they have any tenant buyers? or where they find their tenant buyers?
I read a saying the other day… and I think it holds true here. If you are having trouble finding deals or finding buyers or finding money… you need to look at your marketing… marketing is the key in this business…
Hope it helps
Gary
It is tough in these economic times. But there are those T/B out there that are looking and have money. Here are a few pointers. 1. Your marketing is key! You must be willing to spend a little $ in order to market your business properly and to the right people. 2. Attend your local REI Clubs and promote yourself and your business. You will be suprised at what and who you come in contact with that may already have prospects for you. 3. When dealing with potential T/B’s you need to be specific with your process and structuring of your deals. example. Ask for 5-10% non refundable down. Then when a potential T/B states they don’t have that, you can alter your structure… Ask for 5% down and add the remaining 5% to the purchase price of the home. You can even go as far as promoting a credit match program for monthly payments. This would allow you to get a higher monthly payment and in the end all you have done is taken your matched end off the total purchase price. Creative Financing is key in todays market crunch. Especially where lending institutions are making it hard for people to qualify. Hope this helps.
Stay Posative and always remember your WHY!
TD
tlance is correct but I would add that you need to KNOW the credit score. Do the background and criminal checks. Ask for copies of their paid bills for the past 12 months. Get explanations as to why they were not paid on time if necessary. All of this helps with the evaluation process. I know of a investor who has a 30 PAGE rental agreement. If the tenants really want his properties (which are top notch) they will take the hour or so to complete the form. Timewasters and do-badders are pretty much eliminated.
Needless to say, he claims to have little to no problems. The same train of thought should apply to TBs.
Are any of you networking with mortgage brokers? or buyers agents?
I’ve never had a problem getting a good L/O tenant
the mortgage brokers and buyers agents already do all the hard work by qualifying the buyer.
I get them when they can’t qualify through traditional financing with the broker, he refers to me as the
owner financing guy, they’ve always got money down and the broker warms them up to the fact that they’ll be spending a little more than they originally wanted to.
Same thing with a buyers agent, I offer a solution to their clients as well that don’t qualify. The agents don’t get any money up front but I offer them the opportunity to represent the buyer at the end of the lease IF the tenant follows the term of the agreement.
think outside of the box guys :beer
Motiv8td,
That’s a great solution to getting L/O buyers. Sometimes it takes someone to slap you in the face to give you a D’Oh moment. Do you use the same mortgage guys to close your own deals too?
If the T/B were to go and rent a place they would likely have to put out first and last months rent and a security deposit. I work from that figure and if its not enough I ask for other collateral to basically lend them the balance of the option fee, such as the title to their car if it has equity, a lien on a boat, RV or even their furniture. At this point some of them suddenly remember where they can borrow the money. Others just kind of weed themselves out. Be tough with them and you’ll get a better quality of T/Bs.
Good luck,
donrock
I’m having the same problems here in the DC area. I have yet to find a T/B with the full option fee upfront. And yes, financing the option fee is where all your problems will come from. However, I now do cooperative assignments exclusively, so in essence I’m out the deal once I get my money. The problem is getting my money.
To solve the problem, what I plan to do going forward is simply tell the T/B You can get occupancy and sign the lease agreement, but you don’t get the option until you’ve paid in the full option fee.
I’ve never had a loan before.
I kick back the brokers a few bucks for the referral
Great Idea in with holding the option; hopefully I won’t have this problem arise too often, but if/when it does I’ll be sure to do the same thing. Let us know how that ends up.
i have about 330+ tenant/buyers in my buyers list in less than 6 months of marketing.
id say about 140 of them have 5% or more to put up.
im just having trouble finding good properties with good payments to take over sub2 and then doing a lease to own with my pool of tenant/buyers
hey defcon - please tell us more about your marketing for buyers that is reaping you such good rewards! What areyou doing and how much are you spending? I’d like to duplicate those kinds of results.
id get properties under a non exclusive option agreement for 90 days and i just post it on my craigslist with attractive terms. then it redirects them to my main website for them to fill out a long form. thats it.
get the property under contract and the tenant/buyers will come. remember majority of Americans out there are being turned down by conventional financing. occassionally youll find some that are FHA buyers, they just dont know it yet.
its FREEhundred since its craigslist.
i dont do mailers or vflyers. i just stick to craigslist and my 80 websites i designed/programmed.
sorry i dont do web design anymore for the public. it detracts my time from real estate investing.
I have the same problem about not finding enough properties that I could take sub2.
I mentioned that I use leverage with mortgage brokers, I also have a simple ‘rent 2 own’ form I created with wufoo.com that I post up on craigslist as well, I get at least 20+ good prospects with anywhere from 3-10k to put down on a lease/option. I’m not sure if I’m allowed to post up a link to my ‘rent 2 own’ form or a link to a recent CL ad so you can see exactly how I do it. If I am allowed I would post. Anyone know what the rules on that are?
I say post it, I want to see it!