We have come to the eighth and final installment in this series, in our quest to discover the best investing strategy for success. As I write this post and consider every technique that I have discussed, I am convinced that the lease option strategies offer the beginning investors the best lead-in to success in real estate investing.
It is the strategy that I specialize in. The one where you will find the greatest opportunity in today’s real estate market.
This article will focus on the consulting lease option technique. This strategy, of the three discussed is the easiest to understand and implement. It is safe, with no down side risk. The pay days are excellent for the work and time you put into the deal.
In the process of investing, you will encounter properties that will be difficult and challenging, where deal structure may be impossible. Many properties will be in bad neighborhoods or they will be located out of your local market. Other properties could have numbers that are “upside down”, meaning that what is owed on the house is more that what it is worth.
The beauty of this technique is that your market has no geographical limitations. Where ever there are houses for sale with free property rights, you will have opportunity. It comes down to the strength of your marketing efforts. Without marketing to find these homeowner/sellers, you will have no business.
Finding the Sellers
Once you have your marketing in place as discussed in my previously articles, you will begin get calls from sellers. These will primarily be sellers in your local market. You will have to prescreen these callers and weed out those who are not motivated enough to fit into your funnel. Remember, you are looking for those who need to sell, rather than want to sell. Ask these sellers open ended questions. These are questions that require more than a yes or no answer. You have to discover their pain. In other words, what is happening in their lives that require that they must sell their house now.
This consulting technique seems to work best outside the investor’s local market, since these will be homes you will not be able to visit. There will be properties that come across your desk where you could put together a sandwich or cooperative lease option deal, but they are too far away. Rather than pass on the deal, you could consult with the seller.
Your market will not be limited to the typical homeowner who can’t sell. There will be landlords, investors, and tenant/buyers who will need your services as well.
Working the Process
Once you locate a good prospect, you have to sell your services. If he is truly motivated, this will not be too difficult. No doubt, he has probably tried other selling methods that have not worked. You may be his last hope.
The services you will be selling will be your time, knowledge and experience. Even if you are just beginning this endeavor, the knowledge you have acquired up to this point gives you “expert” status in the eyes of the homeowner.
You should be working from your home office, using your phone, fax, and e-mail. There really isn’t any reason to leave the comfort of your home to do deals.
You will need to have a formal agreement for the seller to sign. This will be a consulting agreement that will layout what you will provide to the homeowner and what your expectations will be for him. Your fees will also be stated.
You will need to require that your clients pay you up front, before any work is done. Sometimes, this can be done with an initial installment, then additional payments as needed. This is for your protection. Once your services have been given out and the information has been provided, it can be difficult to collect your fee from some clients. It will work best for you to set up a Pay Pal account, so you can collect payments on line.
Working with the Seller
You will provide the seller with all the documents necessary to complete the transaction. Your services will also provide him with a specified number of consulting hours. The average lease purchase deal usually takes between 2 to 4 hours. The more complicated deals will take more time. Your experience doing deals will give you a good understanding of what to expect in terms of service hours to provide and fees to charge.
You will consult with the seller and provide your expertise, telling him how to put the transaction together. As mentioned above, you will use the telephone, fax and e-mail. You could also produce a video to add more of a personal touch. This will work especially well, where you could show the seller how to complete the agreements line by line, rather than in a phone conversation.
Usually, you have the initial consulting session where you introduce the strategy concept. This gives the seller an overview of how he will present the nuts and bolts of the deal to his tenant/buyer. The seller will have to understand the process so he will be able to communicate it effectively to his buyer. It is usually necessary for the seller to have several sessions with the investor as the process goes forward, since technical questions will come up that will need to be answered.
There you have it, the consulting lease option technique. The more you do it the better you will become at it and the more money you will make. Keep in mind though; your goal should be to help people who are in a difficult place. Do not take advantage of them. You have the knowledge to make a difference in their lives. Go out into the market place and make it happen.
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