You understand that the following information is educational in nature and is not intended to be legal, accounting, or tax advice. You are responsible for your own financial decisions and real estate investments and should consult your own legal, accounting, and tax advisors before making financial decisions.

A Little Creativity Brings Deal With Low Risk/$8k + In Profits!

Thanks for the lesson today. I am excited that I got my first Home tied up with a Lease Option. Here's how the negotiations went!!

The seller was very firm on the price because of all the fix-up work that they did. The house appraises at $125,000, is a 3 Bedroom 2 Full Bath home built in 1954, but has a complete new kitchen with new cabinets counter tops and tiled floor. Both of the bathrooms have been remodeled, and also comes with all appliances. The last renter just moved out and was paying $925 per month in rent.

When we first talked he wanted to lease option for $1000 option fee, and payments of $1,050 per month. I thought about it, and came back with a counter offer to buy the property for the full price instead if he would be flexible on the terms, since he was very firm on the price. He agreed to accept $3000.00 down with a seller wrap around mortgage to cover the remainder of the price at 7.125% interest, 30 years to make payments at $801.73 per month, and a payout at the end for the remaining balance in two years. I told him that the $3000 would cover any money that he would get from lease optioning it, and that I would still have a positive cash flow of about $100 per month if I was to rent it.

He went to his lawyer, and was told that the deal was too risky if I wasn't going to make payments, then they would have to face foreclosure, so they came back with a counter offer using the same numbers, only binding it into a lease option for two years instead of a sales contract.

My plan is to Lease Option it back out for a $3000 option fee to be applied to the down payment in one year. The rent will be at $895 per month with a $100 per month charge for the option going towards the down payment. I will then sell the option in one year for $135,000 instead of two years while still receiving $194 per month in rent and option payments. Total profits will be $2,328 from rent and option payments, and $10,000 from the option sale at the end of one year of $12,328 minus $4,200 option payments made by new tenant for a total profit of $8,128 minus closing costs at the end.

Thanks for your help! It's amazing what you can do with a little creativity. I made the mistake of not getting an option to renew my option, but don't believe that they would go for that anyway.

Let's go find some more properties!!

Sincerely,

- Kenny I.
Louisville, KY

One of the best resources available to both new and experienced real estate investors alike is a local real estate investing club. Many cities and towns around the country have real estate investing clubs that come together at least monthly to allow investors to network, participate in training, and search for deals to work. Most clubs will allow you to attend your first meeting at no charge and will only charge $5 - $10 per meeting thereafter. You can find potential clubs in your area by asking realtors, investors, lenders, and others you come across while building your team or calling on ads if they know of a club in the area. You could also go to an online search engine like yahoo.com or google.com to search key words and phrases like "real estate club" or "California real estate club" (if you live in California … substitute your state name if you live elsewhere). Additionally you can try sites like www.nationalreia.com (then click on the "Groups" tab at the top of the page) for a list of just some the clubs you might be able to attend near you.

As you continue to attend local club meetings you'll meet or learn of local real estate professionals such as agents, lenders, title and escrow people, lawyers, etc that are anxious to work with you and understand how to effectively work with us as investors. Finding them in this way will often save you a lot of time and effort later.

You will also often meet other local real estate investors that have found success in your own back yard. This kind of association helps you to gain insight into what they are doing to be successful and will often leave you feeling that if they can do it … you can too!

If you happen to live in an area where such a club doesn't yet exist, you might consider forming one of your own. You'll likely find quite a few other local investors that would love to attend something like this as well. Consider finding or creating a club to attend regularly so you can benefit from the knowledge and motivation that these groups stimulate for those that participate in them.

My Prospect Pro

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