subject: Real Estate Investing: The "business Plan" And Developing A Sales Strategy - Part Ii [print this page] Lease options are a great concept, but the reality is they don't work too often in the real world, particularly right now, because if anybody could not have gotten a mortgage a year ago - I think John is the mortgage broker - if they couldn't get a mortgage a year ago or 18 months ago, they're sure as hell not getting one today. The whole lease-option concept right now has some problems and some issues.
Lease with Option to Buy
By the same token, if you wanted to allow somebody to come in and rent it say for five years, with the option to buy it at some point, that would be a logical and very valid business plan I would think. Your private lender would understand that. You would explain to them, "We will rent it to them at $1,000 a month, but they have the option at some point to be buying it for X or Y."
At that point, the private lender would be paid off, but it could be six months, it could be three or four years down the road. Either way, the private lender is not going to mind because they're going to be getting their interest in the interim, and at some point down the road they're going to get bought out.
That's not necessarily a bad thing. That's a strategy that I think makes a lot more sense today. The quick turn, the one-year lease option, I don't think makes a lot of sense. I don't think most people that were struggling to get a mortgage in the last 12 months are going to get a mortgage in the next 12 months.
In the next three or four years I think is very possible, and that makes some sense to me, but people that are struggling right now are not getting mortgages in the next 12 months. That's kind of just the brute reality that we're in.
Closing Costs
Some other things you need to think about are your closing costs, and you go through this list and they're all there. Basically, who will do your closing? Are you going to do it through a title clerk, are you going to involve an attorney, or are you going to try to close it yourself, which is probably not a good idea, but in theory you can do it.
Include Marketing Materials
Then any sort of marketing materials that you might be using as part of this process. I think marketing materials inside of a credibility kit or inside of a business plan have a lot of power and a lot of polish to them.
I would highly recommend that you do that. It just shows your skill level in terms of marketing, and if you go through a business plan and you get to the sales strategy piece of it, and you go through page after page after page of the marketing pieces, the flyers, the signs, the newspaper ads, the MLS listings, the Craigslist listings - if you lay all that out for somebody and they see all the various marketing pieces that you're going to be using, I think it carries a lot of weight and a lot of power. That's the sales strategy.
