Use A 'lease-to-own' Exit Strategy On Your Property
I have a number of different exit strategies
I have a number of different exit strategies. One is wholesaling property for profit.
Well get a property and we scrape the trash out of it and get the stink out. Then we wholesale the place. At times we'll do sweat equity deals, which means we put somebody in the house but they do the dirty work.
At other times we'll do a rent, at other times we'll do a rent-to-own and at other times we'll do a land contract.
But on this rent-to-own, on this lease option section right now; that is the horse we ride 95 percent of the time I would say right now.
Anyone who has been in business for a while will tell you that one of the most important things you can do to help yourselves is through your marketing, through prospecting, networking, and building a buyers list for your properties.
So let's say you got John Doe out there and they're looking for a three bedroom in the township or in the county.
As you're then looking at leads and looking at properties you're thinking of John Doe in the back of your mind, "Hey, I got a buyer out here that's looking for this type of a property."
Now you can negotiate to buy that property, then turn right around and you've already got a buyer set up.
So having a buyers list and keeping track of what somebody's looking for can help you tremendously
Now sometimes you may have another starting investor who's looking for a property but doesn't have the wherewithal in real estate and doesnt even have the machine to be able to go out and find them.
So you can have wholesale prospects that, as soon as you buy a property, you can turn around and do a simultaneous close. You turn it quickly, without too much drama and you never took possession of it.
So the bottom line here is to remember to build a buyers list. Communicate with everyone you can possibly communicate with. Look for people who want a property you have or dont have yet. This way you can tailor your exit strategy towards what you can turn around to those people.
A lease option is just like a rental where the owner is still covering insurance and taxes. I, as the owner, haven't put that on my tenant's shoulders.
We have found that the advantage of doing the lease-to-own comes if they renege or they don't fill their obligation. It's easier for us to move them out and for us to move on with our business.
There are always pros and cons. You will have to outline them and figure out which is the best set of pros and cons for your needs.
Always remember that with a lease-to-own, you can always renegotiate the lease at the end of the twelve month period. You can do a month-to-month or whatever suits your needs at the time. If we renegotiate a lease at the end of the twelve months, we always increase the monthly payment. If the market has become hot, we can also raise the purchase price on the home.
As for the option money itself, we don't go back to them and try to get another thousand out of them for the next 12 months.
What we could do is we could encourage them to put more money down. Let's say we're getting into tax season and they want some money back from their taxes, it would help to put more cash down.
There's nothing wrong with bringing the down payment back up again. It's not mandatory as our policy right now. But it is an option we strongly suggest to them.
by: Alan Cowgill
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