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What is Wholesaling Lease Options? “How To” with an Easy 6 Steps Process.
Wholesaling Lease Options – in other words, where there is a will there is a way.
What is Wholesaling Lease Options and how can they really increase your success rate as an investor?
Real estate investing is one of those businesses that truly can offer plenty of opportunities to succeed and make a lot of money fast. But you have to be ahead of what is going on in the market place and most importantly ahead of the competition. How? By knowing what is the next best thing out there.
Wholesaling Lease Options is a strategy that ties two main stream real estate strategies together – wholesaling and lease options.
Wholesaling (or double closing or back to back closing,) involves finding a property that you can put under contract at a discount, then locate an end buyer, mark it up and structure the transaction where you get to walk away with the spread/profit via assigning your contract or double closing.
Lease Options is where you lease a property, while also having the option to purchase it a specific price at a predetermined future date.
Wholesaling Lease Options: combining Wholesaling with Lease Options
The great thing about Wholesaling Lease Options is that this strategy works really well in both high, healthy competitive real estate markets and economy, and in times when the real estate market and economy are not doing so well.
You probably recognize these 2 scenarios:
- When the real estate market is doing well, a lot of sellers do not want to sell at a considerable discount, even if they are facing a deadline (like foreclosure.) Procrastination, misinformation or just plain indifference can work against property owners’ better judgment.
- When the real estate market is not doing well, property values go down and a lot of properties lose any potential equity. Regardless, property owners might be in a situation where they have or want to sell, and they are faced now with a dilemma.
The good news is that for both scenarios that are always a lot of potential buyers, who for whatever reason cannot buy a house right now, but will be in a position to buy soon and have the cash to get into a property right now.
Here is where Wholesaling Lease Options come in and how you can master and add this strategy to your real estate investing business:
- Find a motivated seller who wants to rent their house and possibly sell it under a “Lease Option to Buy”
- Put the property under contract under an “Option to Buy” agreement
- Find a tenant-buyer who has a down payment and in a position to buy in 1 to 2 years (have him prequalified by a lender and/or go through credit repair)
- Sign the “Lease Option to Buy” contract with the tenant-buyer
- Prepare an “Assignment of Lease Option” contract and deliver it back to the seller
- Keep a portion (as agreed with the Seller) of the Option Deposit collected from the tenant-buyer
Using wholesaling lease options as part of your wholesaling business can be very powerful.
What if you could make two offers to a property owner instead of just one option?
Let’s say the property owner wants $100,000 for the property. You make two offers. One for $110,000 a year from now (via wholesaling lease option strategy) or $85,000 today (via regular wholesaling.) Using “price anchoring” psychology, you can turn a potential “No” from the property owner into a profitable “Yes!”
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