Making Money Consulting on lease purchases with both Home Sellers and Home Buyers!
I love the Consulting approach with lease purchasing as a business model.
Sure wholesaling is okay but when you’re dealing with really pretty houses and great school districts it’s a lot more fun. It’s also a lot more fun to be a specialist in your local area within 10 Mi of your house.
So I’m going to go over in this series Consulting on lease purchases with both home Sellers and home buyers in the broad Strokes, and if you’re interested and one-on-one training with the Consulting approach, please email me at Brian@REISkills.com
Now if you Google Brian Gibbons REI skills you will see lots and lots of material on lease purchase in general.
But I want to give you a business model that I think is really amazing because nobody is positioning themselves in the market locally that I know of as a lease purchase consultant.
I want to talk a little bit about commercial property and leases and leases with option. These are used in the commercial arena a lot. And with the way commercial property is right now, I think there is a great opportunity for an entrepreneur to be able to help
A commercial seller sell “on terms” to a commercial buyer.
One of my favorite authors is www.ccim.com .
If you don’t know CCIM, it is a organization that helps commercial property professionals learn about some wonderful skills, but especially with selling on terms like lease purchase and lease with option on commercial property.
I’ll include from my website a great article on leases with option on commercial property.
So let’s get back to Lease Purchase Consulting, but focus on Residential Sales.
A lot of people are leaving the residential sales workforce.
See HousingWire.com
And home affordability has never been lower, lowest it’s been in the last 33 years.
See NAR Statistics
https://www.nar.realtor/research-and-statistics/housing-statistics/housing-affordability-index
Let’s talk about licensing.
If you’re a licensed agent and not a broker, you have a contract with your broker to be able to do certain things.
Usually Brokers want their agents to do only specific tasks with home sellers.
They do not want them involved with Creative Solutions for home sellers.
Well I disagree. I think that if a licensed agent is trying to help a home seller sell, the agent should be well versed in all of the legal ways to solve the house problem.
Not just the traditional “6% solution” (meaning the 6% commission solution).
So as a consultant, helping a home seller sell and actually making more money on the transaction with the least purchase arrangement, and saving costs, and perhaps making an income advising go home seller on a lease purchase transaction, I think that that would be a wonderful way to make money if you’re a licensed agent.
And if you’re not a licensed agent, as long as you’re acting as a principal in the transaction, meaning you’re a buyer or a seller, an optionor or an optionee, a lessor or lessee.
If you are one of those six positions in a contract, you are not “acting agent for” someone, as a real estate listing agent is “acting agent for.”
And you are at risk in a transaction if you are acting as a buyer or a seller, optionor or optionee.
Those are the two issues,
are you a principal in the transaction and
are you at risk in the transaction.
I think the strongest position you can possibly have is
- to be licensed,
- to have an agreement with your broker that you can accept income fees from sellers by giving them advice on a lease purchase transactions.
I hear the argument from Brokers,
“well if I let this person talk about a creative solution
then I’m going to get sued because
my errors and omissions insurance does not cover it.”
. Well believe it or not you can get separate coverage from errors and omissions insurance carriers. Insurance agents do this all the time. Go talk to an insurance agent that’s independent. They’ll help you.
What kind of money can I make by doing lease purchase deals?
So what kind of money can you get, when you’re doing lease purchase consultant?
Well as you know and lease options there’s two ways to do it.
You can do a lease with option and then assign the deal for a fee, or
you can do a lease with option and stay in the middle which is called a sandwich lease option. In this article I’ll focus on lease option assignments. They’ll be another article on sandwich lease options.
Lease Option Assignments
With lease option assignments, you make money based on the option fee that the tenant buyer is bringing to the table.
Here’s an example on a $300,000 house:
- Comps come in at $300,000
- Market rent for this house is $2,500 per month
My strategy is to:
- lease with an option from the seller and
- assign the transaction for a 3% fee from the buyer.
- The seller gets first and last month’s rent of $2,500 * 2 or $5,000, (or whatever the maximum is allowed by law for security deposits especially if it’s a nice house;
- in some states it’s two or three months rent as a maximum security deposit.
- They’re also might be pet deposits that are on top of that.)
My Fee
- If the option fee is $9,000 which is 3% of $300,000, that would be my fee. If the comps come in at $300,000 I would highly recommend that you set the strike price at $300,000 – $9,000 or $291,000.
At a minimum I would have the buyer fill out a mortgage application
And have a full credit check done by a reputable mortgage underwriter.
Once this is done, something in writing should be written out by the licensed mortgage underwriter as far as the likelihood of the buyers being financed and 36 months. This is not a guarantee, this is just likelihood.
Lastly, the buyer(s) has 7 days to get a building inspection report, and it can be just a walk-through with electrical being checked and pressure of Plumbing being checked, to feel the property is in good working order. I usually have the seller pay for an inspection report to facilitate the lease purchase transaction. The buyers can also pay for a home warranty plan that will take care of major repairs.
There are several pieces of the puzzle that need to be covered in Lease Purchase Consulting.
There are “what if” scenarios:
- What if the seller dies?
- What if the sellers can’t be found for closing?
- What if the sellers get sued and the property gets endangered by the loss of the law suit?
- What if the sellers go through a per5sonal bankruptcy?
- What if the sellers don’t pay their mortgage and have a foreclosure started against the property that the tenant buyer has paid $9,000 for a lease purchase Arrangement?
- What if the property burns down? Who checks on whether or not the insurance is in force?
- What if the property taxes aren’t paid? What happens if there’s a tax sale?
In lease purchase Consulting we protect both the buyer and the seller of the property.
For the best 1 on 1 training, you can contact me at
818-400-3046
Get your one-on-one training so that you can get 10 deals done in 3 months, and create good income for yourself.
We are in our 25th year of 1 on 1 training for Real Estate Investors and Agents.
It really is up to you to make it happen.
All the best,
Brian Gibbons,
