Archive for April, 2015

Wholesaling vs. Lease Options (aka Ugly vs. Pretty) – Part 3

Welcome back…again! Quick refresher: We’ve been discussing two classic & powerful, tried & true real estate investing strategies:

Wholesaling and Lease Options, aka “Ugly” vs. “Pretty”.

Part One of this series was devoted to Wholesaling, and Part Two was focused on Lease Options. Examples were given. Terms discussed. Money put on the table. Moving on…

Whenever a ‘newby’ investor asks me where they should start, I usually tell them that wholesaling is a great way to earn some great money while learning the business, so they should consider starting there. After a while, and when their marketing starts generating leads from pretty house sellers, I tell them that it’s a great idea to learn that part of the business so that they can start to make money from those leads as well.

It’s a beautiful thing when a deal fits easily into a ‘type’ of transaction we know how to do, and it’s even more beautiful when all the stars are in alignment & a deal closes smoothly. But we live in the real world here, right? Besides, we’re problem solvers, and that’s why we get paid the big bucks! :)

Ideally, as we evolve & gain more experience as investors, we should be able to have a relatively even mix of transaction types balanced between ugly & pretty houses that we use to do deals. But that may not always be the case, depending on certain things like personality, market type, etc. It seems to me that there are people who love one & “tolerate” the other, kind of like Elvis & Beatles fans. But the wise ones “get it,” and do both, depending on the deal.

The seller & situation may not always be the only things we need to consider. We also need to think about the big, bad MARKET & what it’s doing. I don’t know about you, but back in 2008-2011, the last thing I wanted was to be stuck with the deed to a house where the value was going DOWN each month! So doing Lease Options or Subject-tos was not even a consideration. Further, most rehabbers disappeared overnight faster than you can blink, so wholesaling & retailing deals wasn’t much of an option either.

Out of that crazy mess, however, some new twists on old strategies & techniques began to emerge. I’d like to tell you about one of the greatest ones right now…

Wholesaling Lease Options!

Wait… What? What the heck is that? “Wholesaling Lease Options? I thought you could only do ONE at a time?!” Really? Who said that?

This is a killer strategy that has recently caught on in the real estate investing community. I see it only getting hotter as time goes by. After I briefly explain it to you here, you’ll quickly see why, and will want to add it to the arsenal of tools in your bag of investing tricks.

This strategy is also known by different names, according to whoever claims to have invented it. I’ve heard it called things like AMPS, MAPS, and ACTS. Call it whatever you like, but when used properly, you’ll be calling it the Easy Money in the Bank Strategy!

How Wholesaling Lease Options Works…

Here’s a typical scenario: You come across a pretty house deal. The seller usually has an underlying loan on the house. They could have a little equity or a lot. They could even be underwater. They’re usually current or not too far behind on their payments. The house is usually in great shape or doesn’t need much work.

Either the seller doesn’t feel comfortable deeding you the house or you don’t want to take title for whatever reason. You feel that the monthly payments are a decent amount for the area.

The house is pretty, the seller owes too much, and/or they want too much for it, so the situation doesn’t qualify for an ‘all cash’ offer. Wholesaling (the typical way) is out.

I know what you’re thinking. This looks like your typical Lease Option deal, right? Yes, I’d agree with you…BUT what if you just do NOT want to stay in the deal? What if the property is 3+ hours away from you? What if you just don’t want to deal with the hassle? What if you really just want to make some quick money with this house & be done? What if your spouse gives you that “look” when you talk about the house?

That’s where this new strategy comes into play! This situation is perfect for it.
You would sell it by offering it to a Tenant Buyer on an Owner Financing, Lease Purchase/‘Rent to Own’ basis. You’d look to get as much DOWN from them, and simply have them make the monthly house payments until such time that they can qualify to buy the house.

Finally, you would ‘assign’ the rental agreement with the tenant buyer TO the seller, and let THEM deal with the new tenants.

Basically, you’d be helping the seller do a lease purchase with a tenant buyer that YOU would find & install, and get paid to do it!

Let’s use a similar example from the Part 2 of this article… Let’s say you find a seller with a house with an ARV of $200,000. The house only needs a little paint or cosmetic work, but it’s totally liveable & in a great location. Their monthly house payment is $1,100, P.I.T.I. (all in, including Taxes & Insurance), and their payments are current. Further, they owe $190,000 on their existing mortgage.

After talking with them, you discover that they need something to be worked out on this house fast, and they’re flexible. You also learn that houses in this area aren’t appreciating fast enough to make you interested, and you really don’t want to stay in the deal for whatever reason.

Until now, you’d probably pass on the deal, because you might see it as being more hassle than what it’s worth. But not anymore! Instead, you decide to use this new strategy to quickly pocket between $5,000-$15,000 and move on to the next one.

So here’s what you do: You market the house on an Owner Financing or Lease Purchase basis. Within a few days, you find someone who has at least $10,000 to put down on a house, can easily afford the monthly payments of this place ($1,100), and is ready to move quickly. Further, they love the house and pass all the background & criminal checks.

So you go back to the seller & let them know that you’ve found the perfect tenant buyer for their house. You tell the seller that this person will take care of the house & eventually buy it outright, but in the meantime, they’ll make the house payments.

The final piece of the puzzle is for you to get the new tenant buyers to sign the lease agreement & simply assign that back to the sellers. Oh, and collect their big ol’ downpayment and put it in your pocket!

The end result? You now have $10,000 in your pocket. You’ve solved the seller’s issues & given them a solution. You’ve given a future homeowner a place to call their own & bought them the time they need to get their credit straightened out. And you’re done with the deal. Next!

I hope that you can see the simple beauty of this strategy, Wholesaling Lease Options. It works, and it works well. So keep your eyes open for the possibility of this type of solution the next time a pretty house deal that you don’t want to stay in crosses your desk.

And we’ll see you here next month!

Until Then,

Tony Pearl

Tony PearlTony Pearl is an entrepreneur, copywriter, proud father, mentor, marketing consultant and talented teacher who resides in the Washington, DC area. He has traveled to over 26 countries, speaks 4 languages, and continues to travel extensively. He has been a professional Ballroom and Latin dance instructor, competitor, and exhibitor for over 19 years. As a Real Estate Investor, Tony has bought and sold over Ten Million dollars worth of real estate, and has been educated by and associates with the best.

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Operating Your Business Of Buying And Selling Houses With $1,000 Per Month Or Less

There are certain expenses a real estate entrepreneur will have in the business, and the more it ramps up, the more these expenses will increase along with revenue.

Fortunately for us, our overhead is extremely small. And when I say extremely, let me do a few comparisons for you:

When my restaurant was open, my break-even was approximately $100,000 per month. That’s just what it took to keep the doors open, including all the costs inherent in a restaurant and most other businesses like labor, insurance, utilities, product, etc. The food alone was $.40 of every dollar that came through the door. That’s a tough nut to crack for any business, especially when you’re dealing with small numbers like those found on your dinner check. There were many times I wish I could sell a filet mignon for $10,000 like we get out of houses with little overheard and very little work.

In the restaurant business, we’re open for lunch and dinner most of the time. There were always at least 12-15 people on duty with over 50 employees total, open seven days a week, and a manager or assistant manager had to be there 100% of the time. If that manager happens to be the boss, that pretty much sucks up that life.

The biggest problem was not enough revenue, and I could have turned it around but chose not to. Even if I had, it still would have been a golden turd, spending way too many resources into a business that had no chance of ever making any real money.

If you’re going to run a business, make sure it has the ability to make you rich.

Now let’s take a look at your real estate business by comparison. There are only a few things you need to spend money on each month if you’re following my system, and there are two sides of your business—the buying side and selling side.

On the buying side, your outgo is small and, fortunately, there’s very little for you to do thanks to today’s systemization. The big thing you need to do is…

Make Decisions

In my real estate business where I still do a few deals per month on a part-time basis with the help of one assistant, that’s what I do—make decisions. And, that’s almost all I do.

Every once in a while, I go look at a house. I always look at them beforehand if I’m going to pay cash for them. Sometimes I still go into a home and negotiate a deal, but mostly the grunt-work is done by someone else.

In order to get these leads coming to you, there has to be a few things done, but those things should be done by other people. Let’s recap the five steps to success in case you haven’t heard them before:

  1. Locate Prospects
  2. Prescreen Prospects
  3. Construct and Present Offers
  4. Follow Up
  5. Close Quickly

The Buying Side

When you’re buying houses, step one is done mostly by your Virtual Assistant. Today, we use two things:

First, the VAs call leads online from multiple websites and sends us the filled-out property information sheets. They can do the same thing for you, all you have to do is activate them. Secondly, we have people riding around looking for FSBO signs and sending the phone number to the VA to follow up.

We get a few calls from our ads, which the VAs run, but most of the business comes from them calling leads and the FSBO signs sent to us. Every once in a while, we get a lead off of my truck (which is wrapped in advertisements) and other random odds and ends.

So, your first expense will be a Virtual Assistant if you’re going to be in the Pretty House business, and, frankly, you’ve only got three choices:

You’ll either hire a VA, an employee or be your own VA and do the work yourself. That last one, my friend, is not a very smart decision. You won’t be at it long before you realize it’s work you don’t want to do.

So, your first expense is a Virtual Assistant, and your cost on that is about $297 per month, which includes five hours of VA service, a website, an interactive phone service to record calls from buyers (which we’re getting to), your texting service and daily leads sent to you to forward to your VA. If you find you need more than five VA hours, you can add them as you need them for $.35 per minute.

Secondly, you need to set up an account with PATLive. PATLive is your 24-hour answering service that takes calls from sellers. They take calls, collect some information, make sure the house is for sale and forward it to you. All you have to do is then forward the information on to your VA for them to follow up.

The cost is about $150 per month, so put that on your list. So far we have $297 for your VA and $150 for PATLive.

On the buying side, there’s not much else to spend money on because the ads online are free, the VA is already covered and FSBO signs you ride around and find yourself are free. Now when you get to my Quick Start Real Estate School, I’ll teach you how to have those sent to you online by an army of people looking for them at a cost of $10 per lead. For now, especially if you’re just starting your own business, find the FSBO leads yourself and save the cost.

If you’re keeping track, we have $297 for your VA, $150 for PATLive and if you’re having leads sent to you, leave room for $10 per lead for however many you think you’ll get. For example, an extra 20 leads per week would be $200 to get those leads, but I wouldn’t do that unless your VA can’t find enough leads online to work on.

The Selling SideNow that we’re on the selling side, you need an interactive voice response (IVR) system to take calls from your buyers. The good news is it’s already included in the $297 monthly we discussed. We set it up for you so there’s nothing for you to do except activate the service. The bad news is that there’s a small fee per month to run your IVR of $.05 per minute to record information from your buyers, so leave room for $25 worth of minutes each month.

You’re also going to need a website to post houses on so people can come to them, but it’s already done! It’s part of the $297 we’ve discussed, and we take care of the hosting for your website to keep it online. Your VA will also maintain your website, update it and create online flyers for it if you instruct them to and run ads to attract buyers.

You’ll also need pointer signs, 10-15 per house with one or two for the front yard, so throw in maybe $30 per month in signs.

So far we have $297 for a VA with maybe a few extra bucks for overtime, $150 for PATLive, $25 for IVR minutes and $30 or so for signs. That’s it!

Add It All Up

With your costs per month totaled, you know what you’ll find? You have monthly fees that combine for less than the costs of the tablecloths I used in the restaurant. That’s less than $1,000 per month to run a business that can produce you a minimum of $10,000 per deal even if you only do one per month.

This thing called real estate just doesn’t compare to most business models for other industries across the country. We have almost no overhead, no operating costs and no risk if you do it right, and we have the potential for maximum, massive gain. That’s a hard business model to beat.

Setting It All Up

If you want to get your VA service setup, you’ll find a form enclosed with our magazine which you can return to us or you can call our office at 888-840-8389. To set up PATLive, visit PATLive.com. Yellow letters are an additional cost we didn’t mention because they’re only used when you can’t get enough leads doing what we just discussed, but you can get those for about $1.10 a letter at YellowLetterLady.com, which includes postage.

Do the few things I just described, come see me at Quick Start Real Estate School so we can put all the pieces together, set the systems up that we spent years perfecting for you and you’ll find this business takes very little of your time. That’s because the only thing left for you to do is…

Make Decisions

My friend, that’s the way all businesses should be—nothing left for you to do but make decisions. In fact, I want you to get your business to the point where it’s boring. Boring is good. Boring means you’re systemized and you’re profitable.

Ron LeGrandRon LeGrand is the world’s leading expert in residential quick turn real estate and a prominent commercial property developer. Ron has bought and sold over 2,000 single family homes over the past 30 years, and currently owns commercial developments in nine states ranging from retail, office, warehouse, residential subdivisions and resort

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