IS IT BEST TO PURCHASE THE INVESTMENT PROPERTY AND THEN FIND THE L/O TENANT OR SHOULD I GENERATE A LIST OF PERSONS LOOKING TO BETTER THEIR CREDIT, TALK TO THEM, FIND OUT WHAT THEY ARE LOOKING FOR, THEN SEARCH FOR THE PROPERTIES FROM THERE.
If you could actually find a lease option buyer before you bought the property, that would be great. However, in the real world that is a difficult task. Lease-option “buyers” are really just renters and only a small percentage will ever buy the property.
Mike
Does it really matter if the tenants buy or not? I mean if they decide not to their option money is non-refundable, your profit. Then you can either renew your L/O aggreement with them or find new tenant/buyers.
Correct?
Correct…BUT in real life it doesn’t work out quite that well. The truth is that lease-option “buyers” are really just renters. Their credit is shot or they would just go to the bank and get a loan to buy a property with better terms and at a better price than the lease-option “seller” is offering. VERY FEW people with terrible credit have a big pile of cash. Therefore, while you’re waiting to find this rare person with terrible credit but a pile of cash to do your lease-option deal, you are losing rent and continuing to pay carrying costs. It doesn’t take too much waiting for you to actually lose money as compared to just renting the property.
Most lease option contracts require the tenant to do the maintenance. However, since they didn’t have any more money than the typical renter, they don’t do it. Worse, they may do it wrong. Then, when you get the house back, there is a LOT of deferred maintenance to be done. I could go on and on about the realities of lease-options, but you get the idea. They sound GREAT at a guru seminar, but reality is something quite different.
Mike
Sorry derlamtay, I don’t mean to hijack your thread.
Propertymanager,
So do you think sandwhich L\O’s is a good way for a person with good credit but no money to start out investing?
Im in the process of starting out by doing L/O’s but you kind of lowered my motivation! Lol!
NO! I think that sandwich lease options are VERY RISKY! Personally, I do not do them.
Mike
So i guess Finding and Referring and also Controlling and Assigning would be the best way to start out and then when i have built up enough cash reserves moving on to Buying and Selling and also Buying, Rehabbing and Selling.
Lvrei,
Finding and Referring (Birddogging) does not usually pay very much. Buying and assigning or otherwise wholesaling is better, but you will have to keep generating deals to get paid and you will be paying income taxes on any profit.
Your original plan could be made better if you purchased on a lease option and then simply rented out the property. This is MUCH less risky than a sandwich lease option. As I said, I never do sandwich lease options.
Good Luck,
Mike
Hey Mike,
Do you have any suggestions on the best techniques in generating the deals as beginners to wholesaling?
One of the easiest techniques is to put the property under contract and then assign the contract to your buyer. However, you should ALWAYS have the money to close if your buyer falls through (and they frequently do). To do otherwise is unethical and bad business.
I think that you’ll find that it is easy to find a bunch of people who claim to be “buyers”, but a lot of them are newbies, wannabes, and pretenders. You often won’t know who the serious buyers are until the money is due.
Mike
So is there any hope for those of us out here with low cash reserves and questionable credit?
Yes, there is hope. There is hope IF you start working 2 or 3 jobs; fix your credit; and obtain a little cash. This shouldn’t take too long if you’re serious about it. Then, you can start investing with some money and good credit and you will have a real chance to succeed (IF YOU HAVE DONE YOUR HOMEWORK AND UNDERSTAND THE REALITIES OF RUNNING A BUSINESS). If you aren’t willing to work hard enough to accomplish this, then you won’t succeed in starting a business anyway.
Good Luck,
Mike
I disagree Property Manager
I was hoping someone would disagree
can u tell us why u disagree because iam one with no money. and have a hard time getting the funds to do marketing as iam living pay check to pay check
one of the reasons that oscarpope disagrees with manag. is because you can make money with l/o having little money.sure there’s risk in them but then again everything else has a risk. sure having money can help you a bunch when something happens or to do some advertising but that shouldn’t stop you from doing l/o.just study and feel comfortable about ( the things that you can do to protect your intrest) the subject before you do them.
dtrump it doesn’t take that much to do some marketing, just a few signs will do it to start out, just be creative.
I can’t stress this enough, study, study, study and make sure you do them right from the begining and you should be on your way to having a good reputation around your town. Good luck & God bless
Dtrump,
There are people out there that r tired of losing money in the stock market and are looking for some low risk investments with moderate to high returns on there investments. The idea is to find those people. It’s not easy approaching some rich person and selling them your idea, but it can be done with persistence. they’re ususally looking for around 10- 12 percent return with extremely low risks. That’s where you come in. Invest in education concerning Real estate and also your financial understanding on the like. You’ll find that the more you know the easier it is to convince someone to fund your deal!
aseruti,
You missed the point. Yes, it is possible to buy a property with no money and bad credit using a lease-option, sub-2, owner financing, etc. I have done all of these types of deals myself (although I have excellent credit).
What you are choosing to ignore is that fact that it is nearly impossible to run a business with no money and no credit (in other words - no reserves). The issue is not whether you can afford a few dollars for advertising. The issue is that someone who has no money and bad credit must have EVERYTHING go right. This almost never happens. You can not operate a business with no money and bad credit. It’s just that simple.
You can hope that I’m wrong, but to do so is to ignore the facts.
Good Luck,
Mike
I was referring to OPM
thanks,