Unlocking a Mystery - Three Paydays From Every Lease Option Deal

By Tom Dunn

It’s been said that pigs get fed and hogs get slaughtered. I disagree… I believe a little hoggishness is a good thing, especially when it comes to your bottom line. As long as you make sure that all parties to the deal are getting what they need, you should never feel guilty about trying to maximize your return.

There is a way to get paid not once, not twice, but three times from each real estate deal you do. Let’s examine…

First, you place an ad in the paper seeking a motivated seller. The ad might read, “I Will Buy your house or take over your payments.”  You get calls and finally a truly desperate seller calls. He needs to sell RIGHT NOW… and you’re his last hope. The reasons don’t matter, but the motivation does.

You immediately skip over to his home with all haste, and negotiate an “option to buy” price of $120,000 for his property, which has a market value of $155,000. After inking the deal at his kitchen table, and agreeing to pay him a monthly lease payment of $900, you place a “Rent With Option To Buy” sign in front, and several more around the neighborhood.

It takes a couple of weeks, but soon you get a buyer who has marginal credit, but a good job and $5,000 cash, which you collect from him as a non-refundable option fee. That’s PAYDAY NUMBER ONE. You sign a lease option contract with your tenant/buyer to lease the house to him for $1150 per month. Every month you will realize a $250 positive cash flow. That’s PAYDAY NUMBER TWO.

Your tenant/buyer also signs an option agreement, and you give him the option to buy the house within 12 months for $165,000. When and if he exercises his option, you will exercise yours with the seller for $120,000, and put the difference of $45,000 in your pocket for PAYDAY NUMBER THREE.

As soon as you find the buyer you return to the seller and tell him the great news. Now is the time, at the height of his excitement and relief, to have him sign all the transfer documents for the sale of the home. This is your protection. You will not file these documents unless and until it becomes necessary, but you will have them, just in case… in case something happens to the seller, in case he just has a lapse of memory, in case pigs fly.

You will also begin immediately assisting your tenant/buyer in repairing his credit and finding a mortgage broker who can help him obtain the financing necessary to exercise his option and buy the property. These are the things that will set you apart and make you successful. These are the things most investors don’t take the time and effort to do.

It’s called going the extra mile, and it’s what makes you an investor rather than a hobbyist. It’s also what helps you get fed like the hog you are. Good hog.

Now, go make more offers!

Tom Dunn is a successful real estate investor and publisher of the wildly popular monthly email newsletter, DealFiles. DealFiles are the real stories of real investor’s real estate deals. Detailed, encouraging, and highly entertaining, DealFiles will stimulate you to go out and make deal happen for yourself. To subscribe to DealFiles visit Real Estate Investor Stories at http://www.dealfiles.com.