Getting paid cash is one of the best parts of real estate investing. However, there are times when the dollars received are less that expected.. Take for example the most recent deal that I closed. The home was a 3 bedroom 2 bath ranch in a great subdivision, with easy access to shopping, schools, and recreation. The seller had contacted me from a marketing piece I had sent her over a year ago. At that time her house was under contract as a rental.
The renters were moving out soon and she needed to get the property sold. she noted that she could keep the home out of foreclosure for about 3 months. After that, she would be out of money. I put the house under contract as an “Option to Lease Option”. I placed a sign in the yard, worked up a digital flyer and began marketing the house.
Ready to Receive The calls
It was slowing going at first. The home was located in a Cul-de-sac so there was no thru traffic except for those who didn’t know that they could not exit the subdivision from that location. I had to rely on the neighbors and my flyer showing on the marketing sites where I had posted it. In a couple of weeks, I began to receive calls. Some calls were from “tire Kickers”, but there were other callers that seemed interested.
I worked it out with the owner for her to leave the key at the house so it would be more convenient for the perspective tenant buyers to set their own schedule to come by and see the house. This arrangement worked out well. I asked the tenant buyers to call me when they arrived at the house and to call me when they were leaving.
There was some interest with a few of the prospects, but nothing seemed to point towards a contract. As a few more weeks passed there were some follow-up calls from one or two prospects wanting a second look. There were a few additional first time callers, but no one wanted to go forward.
Financial Challenges Looming
The owner let me know that she could probably pay one additional mortgage payment, but that would be the last one she could afford. I asked her if she would be willing to rent the home if the right prospect came along. she agreed that she would be willing to rent the home. She needed to get it occupied and become income producing. She did not want to lose the home to foreclosure.
Casual Interest Turns Positive
Shortly thereafter, I received a call from a young couple who had called earlier. They had also visited the home and liked it, but they were also looking at other homes in the area. They had two children and were interested in living close to a certain school that they believed was one of the better schools in the county.
They were currently living about 45 minutes away and wanted to locate closer to their work. This home seemed to be what they were looking for. They wanted to rent rather than buy, but they were open to a purchase in the future if the home and neighborhood seemed to fit their needs after a period of “testing”.
This couple came for a second look. They asked several questions that showed me that they were near ready to go forward with the rental. After some discussion with them, I contacted the owner concerning some issues they had. The main issue seemed to be the monthly rent. They were paying a little less that this advertised house and they were requesting a reduction.
Modifying The deal
The owner was under pressure to get the house rented. She knew that her time was running out, so she agreed to lowering the rent. This sealed the deal. I had the couple complete the application process and I began the process of checking them out. There rental history and work status was excellent as well as other referenced information. The owner to say the least was very happy. We set a date to meet at the house and complete the agreements.
Looking back at the deal overall it didn’t go totally as planned. My initial goal was to find a tenant buyer who would enter into a Lease Option, however, the deal ended up as a rental. This will happen from time to time. I am confident that if I had more time I would have been able to lease Option the house. However, with the owner’s financial situation and her need to get the house occupied renting the house seemed our better option.
My pay day generated somewhat less income that expected. However, when looking at the big picture an important focus is not to let the house get a way. I never will hold out for the bigger pay day from an option deposit that may not be possible and let a rental pay day slip away. When you put your time, energy and related expenses into a deal, it’s important to get paid. Otherwise, it won’t be long before you will be out of business.
So this deal ended on a positive note. The owner got her house occupied with a great renter and the possibility of a future sale and I got paid for my services.
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