- Were You Aware There Are Three Ways To Profit From Just ONE Lease Option Deal? Here’s How Real Estate Investors Make Money With Lease Options...
Hi, this is Frank Chen with REIClub.com, the only site you need as a real estate investor. Today I’ve got a quick video on the three profit centers for lease options
1. Upfront Option Fee from Tenant Buyer
- What does an option fee do? Not a downpayment.
- How much do you ask for? 3% to 5%
- Non-refundable, expires when option expires in 12-18 months
- SEPARATE AGREEMENT FROM LEASE
2. Monthly Rents
- How to charge more than market rent
- Why would tenant buyers pay more per month?
- Rent credits - quick explanation
- Avoid rent credits even if you hear gurus suggest them, most lenders won’t allow them
- Should be able to get your (Investor) monthly payment equal to mortgage or not much more so it’s not necessary to charge Tenant Buyer more than market but can be flexible based on payment history
3. Cash at Sale
- How do you price an investment to be sold 1-5 years later?
- Contracts needed - option to purchase agreement
- Property must be appraised for agreed-upon sale amount
- If you buy the house for less, you sell it for more and make money on the difference
- Work with Tenant Buyer to get them qualified
- Try not to give the tenant buyer a long time to get everything together - Max 2 years
- Option to renew if the Tber is serious
- Otherwise, find someone else with new option fee
When it comes to Lease Options, each deal is different so there are no hard rules on how to manage/create your profit centers, but typically, you should be able to make all three work on each deal. The sum of all three can really add up to decent numbers so there is no need to be excessive on any one area. Get paid well and help people get into a home. That’s your mission.
Again, this is Frank Chen with REIClub.com. Please take the time to leave your comments for this video below and please subscribe to our YouTube channel so you’ll be automatically notified when we upload more quick video tips for you. Take care and good investing.