Hey folks,

Happy Fourth of July weekend! Independence Day!

As you celebrate freedom and liberty this weekend with your loved ones and friends, be sure to enjoy yourself. No matter your financial situation, the important things in life have nothing to do with money. As “they” say, money is not everything…………….BUT, it certainly can make life easier.

So, what do you plan to do to insure that you can enjoy the important things in life?

How about investing in real estate? Creating cash flow and profit from thin air? Building businesses that pretty much run themselves? Make your business secure, so that should you take no further action, it continues to run at a profit, and grow?

That my friends, is exactly what subject to investing can do for you.

There are multiple ways to exit from your deals, and each deal and your needs will dictate what, when, where and how you extract your profit.

Me? I prefer some cash now, with the majority of my profit coming over time. I like to create steady, reliable income streams, because this provides a lifestyle of freedom.

If you are already a student of my course materials, you should know that I don’t really focus on any one specific exit strategy. However, the main point in all the ways I exit my subject to deals is this, “Create the most profit*.

I do want to address one specific exit strategy today though, and that is the lease option, or rent to own. Many subject to course materials out there advise their readers to use lease option as an exit, and it does seem to be a common business model amoungst many investors.

There are also many folks teaching how to do lease options. This means there are multitudes of ideas, techniques, and methods employed, as well as paperwork combinations being discussed online and off on how to set up and manage a lease option transaction.

There are of course commonalities in each. A few examples might be………..

Most course authors, mentors, teachers and investors agree that when selling a property with a lease option, it is best to use two agreements. A stand alone option agreement, with language in it which terminates the option should a corresponding lease be defaulted upon. As well as a lease, which stands alone, as a rental/occupancy agreement. This is frankly, after being in the business a while, common sense.

Other rules of thumb if you want to call them that, would be option amounts, most course authors advise students to collect 3-5% upfront.

Aside from that, as far as I can tell, there is not a whole lot that I truly agree with, or run in common with others who promote using lease options as an exit strategy for subject to deals.

So, I thought we could address the proper use of a lease option as an exit strategy, as I teach and do.

First and foremost, you must obtain the correct mindset. This means to me, to ALWAYS remember, YOU are in control of your deals. When you sell using a lease option, the idea of course is to obtain the very best tenant buyers you can. This includes the homeownership mentality. These would be the type of folks who genuinely want to OWN the house, and will act like they do already from the moment they move in. The type of folks who will maintain your property with due care, and pay on time. By screening well, and collecting respectable amounts of money upfront, you will increase your chances of the tenant buyer actually purchasing the home. You will also be able to remain in control, as the entitlement attitude of typical renters can be avoided.

Next, before you allow perspective tenant buyers in to see the property, prepare the home. This means cover the basics. Clean the house, make sure everything works nice, and the home smells good. I don’t mean to paint and carpet every home, or do a remodel, just make sure what exists, is in working order and clean.

A few specific tips would be to use common household cleaning products like bleach and pine cleaner to make the house shine. Also, there are several very cheap ways to insure your home for sale on a lease option smells nice, the easiest being to buy those little electric outlet air fresheners. When we have a house for sale, after it is cleaned, we have those placed in very room of the house.

After this, before showings, arrive early, and make sure all lights are on, and the home is bright. One thing I like to do is to take along a pot of cinnamon oil and apple slices. We’ll place this on the stove about 30 minutes before the first scheduled arrival, and remove it before showing. This creates a nice homey apple pie smell, and frankly, relaxes me, and all who enter the house.

One common mistake I see investors making all the time is how to handle showings. Many will try to sell by doing open houses. Frankly, I am a firm believer that open houses were created by real estate agents to make home sellers feel better, and to create lists of potential buyers and future listings. Granted, nothing wrong with that really, it does work for those tasks. However, I cannot imagine myself sitting in a house for sale for hours, while curious neighbors and looky loos stop in seeking free food.

However, the concept can be adapted, and used properly to truly increase interest in your property, and often times, increase your profit as well.

I often hear about other investors who are busy all the time, when they have houses for sale, or for rent, because they run to the property everytime someone calls with even the slightest interest expressed. Me, I am too lazy for that approach.

Here is how I suggest you sell or rent your properties. Market like you always have, perhaps incorporate some of the marketing methods I teach, and really draw attention to your great available property. When people call to ask about it, and set up a time to see it, schedule multiple showings.

I’ll give you an example: At the moment I have some properties for sale on a rent to own basis, more than 3. So, when people call, we first identify which property they are calling about. (this often peaks their interest in what all we have available) After this, we tell them about the property, and the type of deal we are offering. (the basic terms of our rent to own program).

After this, I inform the caller that the property will be open for viewing on a specific day and time. Usually early evenings during the week, and early afternoon on weekends. I then collect the callers phone number, and ask them to call me to confirm they will be attending the viewing at least 45 minutes prior to our scheduled time. This procedure alone screens out most who are not that serious about the property. In addition, on the scheduled day for viewing the property, I sit down about an hour before and call all to confirm they will be there. I know from experience, even after doing that, 2 out of 5 will be no shows. When I set a day and time, the time will not be spot on. Meaning, if we show the house on thursday, “the property will be open for viewing between 6:30 pm and 7:00 pm. This allows for some staggering of arrivals, but insures that those who do arrive to see the house will not be alone.

There are multiple reasons for scheduling several potential tenant buyers to look at a property at once.

The main one being that, with many interested parties at the house at the same time, those who are TRULY motivated to buy/rent to own, and can afford the property, will get into a competition mode. A hunger develops often times, very much like at an auction. I’ve often advertised properties stating specific amounts needed as option money to move in, and collected as much as 4 times that amount, just because someone wanted the house before anyone else could get it.

Another benefit of multiple showings, or mini-open houses as we refer to them here in my office, is that you can collect information from potential buyers. Due to many people being present at once, I like to have a sign in sheet, with a feedback section on it. We have everyone in attendance sign in, leave their name, number, email, and comments about the house. I also pass out cards that advise folks that if this particular property does not meet their needs, they can go online and send us their specific buying criteria………and be notified first, when something matching that comes available. This is an easy way to build a buyers list, or add to an existing one.

I do prefer to conduct this type of showing when the home is vacant, but, will on rare occassions, use it when the sellers have not moved out yet, only we add some personell to the mix. Always, if you are showing a house before sellers have moved out, be sure to watch their personal belongings, etc while showing. Respect that even though they have sold to you, until they move, this is their home. It is also wise to not have the sellers present when doing showings, as they may not be the most helpful, and often times get in the way with their emotional attachment to the property. Remember, even though you must project confidence when selling your property, it is just the commodity in which you trade and sell to make your living. NEVER get attached to a property, or the outcome of a deal.

Now, when people are calling you asking about your house available rent to own, they will often have questions about how your program works. Because I am VERY busy, I don’t have time to be on the phone describing how our program works, the details of the property, and the terms, with every Tom, Dick and Harry. It’s not that customers and potential clients are not important, they are, there are just better ways to streamline the process.

When I advertise my houses rent to own, we of course place signs out for the property, on it, near it, pointing to it, and in the area. I also place signs and flyers inside the front facing windows of the property, in case outdoor advertising goes A.W.O.L. (its does sometimes, weather, vandals, competitors, Realtors)

My flyers for the property usually involve three things. We have the general information flyers that are single page, left inside the info tube by the sign in the yard. In addition, I’ll staple another flyer to the back of that, which is basically a “rent to own, what is it? and how does it work?” explanation.

The third type of flyer is one left taped to the front door, with pull tabs complete with address of the house, and contact info for me. This is because once in a while, the information tube will run out of flyers. I also advise checking your information flyers often. It is not unheard of for someone looking at your house, to remove ALL flyers, in an ill conceived notion that this will remove competitors ability to purchase or move in.

You may also want to include whatever application form you will be using at the property as well, with fax instructions for submitting it, and/or perhaps a flyer sending potential tenant buyers to an online source to complete your application.

I will paste a sample of my “rent to own, what is it? how does it work” flyer here for your review and use if you so desire. Naturally, make sure you place your contact info into the form before using it. You may also make changes and create your very own version taylored to your program. I will paste that at the bottom of this post.

Stay tuned for next time, when we discuss some very specific ways to increase your profit on each and every deal. I plan to make this a mini series of posts on selling your subject to deals with a lease option. Naturally, if you purchased your property for cash or with a mortgage in your own name, these methods will work as well.

Until then, Happy Independence Day America!

God Bless the U.S.A., and keep our troops safe!

Jim

The Biker Who Buys Houses

Here is the sample Flyer I mentioned. Formatting will not be quite right, since I am pasting from a word document.