Lease Options: As An Investment Strategy

More and more we are seeing Rent-To-Own properties popping up in the market. As the markets change and lending rules tighten, many families/individuals are getting bumped out. It is a dream that has been taught over the generations to own your own home. These people, who have been bumped out, are starting to look for creative solutions to get into home ownership.

This is where you, as investors, can help to provide them a solution to their real estate problem. Lease Options or Rent to Own can be that solution they need. Now what are the benefits from an investments standpoint doing a rent to own over a standard buy/rent/hold strategy?

There are many benefits that you can gain from a lease option. Lets first look at the typical hassles of a buy/rent/hold strategy on a single family investment property. When you own a rental property, it may not cash flow as much as you would like, or it could even have a negative cash flow. When a tenant moves out of your property, you will have to spend time with a vacant property, also effecting your monthly cash flow. Lastly, you are stuck with all of the maintenance and repair costs of the property.

With a Lease Option property, you can avoid a lot of these common issues. Your tenants are paying higher rents, because you are adding rental credit. You will have also collected an initial option deposit at the beginning the rental. Your tenants tend to stay in the property for the length of the lease, as they are aiming to purchase it at the end. This makes your vacancies next to NIL. Lastly, your tenants are responsible for taking care and maintaining the property, freeing you up for working on more deals.

As you can see, this is a great strategy to increase you cash flow, decrease your headaches as a landlord, and finally, helping others into home ownership. Good luck on your new Lease Option Strategy! 

Finding Money For Deals

It can be very exciting when you begin to learn about investing in Real Estate. It can offer you a way towards your financial goals and dreams. Then the realization for many people kicks in, "I don't have any money to invest!" This thought stops many investors in their tracks.
 
So what do they do? Some investors limit themselves to "no money down" strategies only. While others just quit completely, saying that investing is not for them.
 
This is limited thinking. In reality there is an abundance of money available for deals. If you find a great deal, but don't have the money to buy it, look for someone who does. Who do you know with money that would consider investing with you so that they can also get a good return on their money. This is called Joint Ventures. Once you realized the potential in doing Joint Ventures, money no longer is a problem for you deals.
 
It is always better to get 50% of something than 100% of nothing.

The Fear of Financing

To some, the fear associated with investing can be so powerful that it halts all progress made towards their personal financial wealth. Many have fallen into the scenario of "analysis paralysis". They keep finding a new reason why NOT to start. Even after all fo their questions have been answered they still find something else wrong with the deal, or the market, or the property, ect.
 
The only possible way to get over this state is go just dive in. You can only get comfortable if you just start at the beginning. Make your calls, send if offers, walk through properties. Only be the action of doing will you gain confidence in your ability. Buying another book or CD or even going to another seminar will not get you over you fear of investing.
 
For anyone to be successful, you must develop the attitude of becoming comfortable being uncomfortable.

Professional Negotiators.

We are all negotiators and some of us are better than others because of experience.  My children are some of the best negotiators I have encountered.  Different people react in different ways to different offers in real estate.  You can level out with good negotiators by realizing their techniques and being prepared for any negotiation that involves bringing in a lot of money.

Remember the expression that a Penny Saved is a Penny earned?  This was wisdom from Ben Franklin. He was an amazing negotiator.  He realized that saving a penny when you buy is the same thing as earning the same penny and that was even before we had income tax.  Today when you save a penny or even $ 10,000 because you buy a property at a below market price, you saved more than the discount.  To pay another dollar to buy something, you first have to earn that dollar plus the additional tax .  Saving $1,000 when you buy something is the equivalent of earning the $1,000 plus tax.

There are many secrets that top negotiators use to get to an agreement.  An agreement doesn’t mean winning.  Unless both sides in a negotiation receive a benefit, even if it is initially agreed upon, it will usually fall apart with one side failing to perform as agreed.

If you are going to buy, sell and manage real estate, then you need to learn to negotiate.  As you become good at it, you will make a lot more money.  Negotiation is probably the most valuable skill that you can acquire.

Income versus Wealth

As consumers we are programmed to buy depreciating assets. Advertising messages urge us to buy doodads or things such as cars, furniture and clothes that will go down in value. Whether you have the cash or not, retailers are happy to extend credit or take your credit cards. This results in a pile of debt and useless items that would be sold  for much less if they had to be liquidated.

Having a large income doesn't necessary translate to wealth. Without understanding financial strategies that wealthy people use, people buy cars that are too expense and houses with payments beyond their means and try to keep up with their neighbours.

It is not about the amount you make but what you do with it that counts. If you invest in depreciating assets you will be digging yourself into a big hole that is hard to climb out of.

When debt is used to buy things that increase in value and generate profits, a person is thinking like a wealthy person.

True wealth comes from financial independence  and living within your means with most money coming from passive sources.