Real Estate Boom! Why would seller do L/O?

[R/E Possibilities 0]

If the real estate market is booming(prices going up 10-15% annually and houses are selling fast) why would a seller want to do a lease option with me/investor?

 

This is currently the case in the San Francisco Bay Area.

 

I want to dive into L/O investing but I can't seem to get over this obstical in my mind.

 

Thanks,

 

 

Ed

[MichaelC 160]

Ed, you and I had this discussion previously. However, it's a good question and I want to share my reply here, not only for you but for anyone else who might be interested. Other's comments are certainly encouraged.

Your concerns regarding your local real estate market is one I hear almost daily. Much of the country is in the midst of a strong sellers market. San Fran is but one. Where I am in south Florida has seen record sales and appreciation for four consecutive years, with an average annual rate of appreciation of about 18%! Same with NY, Baltimore, and most every major market across the country. So, how do we succeed in this type of environment?

First, the reality is we as investors will need to work harder to find those motivated sellers and profitable deals. That shouldn't be a problem for anyone who is serious about success. No one should have the idea that the deals will be made without effort.

Having said that, I also need to say that because the local market is strong doesn't translate to every seller in that market also being strong. There will always be homeowners who, despite the local economy, need debt relief of one form or another. It is ironic but this record real estate market we have is also accompanied by a record number of bankruptcies and foreclosures. Homeowners are definitely in need of financial problem solving. That's where we come in, Ed. It is our task as smart real estate investors to find them and, once found, to provide them with a solution.

Lease purchasing is one way to fill this need because of the flexibility it offers. For example, a truly motivated seller is the guy we can get to do a sandwich lease. But, what about the seller who either isn't that motivated, or doesn't have enough equity in his property to make a sandwich lease worth our while? We can do a Pure Option, or an assignment, or a Cooperative Assignment. If one approach or strategy doesn't fit, we can fall back to Plan B or C. My experience has been that if you speak with enough sellers and make enough offers you will get your share of deals. On the other hand, continue studying and wondering and contemplating to the exclusion of taking action, and you'll find yourself in the same position six months from now as you are in today.

Ed, while it is understandable why you think the way you do, I urge you not to place barriers and obstacles in front of yourself. Don't prejudge your local market or the homeowners in it. Doing so will only prevent you from trying and succeeding.

[R/E Possibilities 0]

Thank you for your words of wisdome. I guess I am generalizing and pre-judgement the market. I like your reminder that there are record numbers of foreclosures. I think to myself, why didn't these people simple place their home for sale....procrastination, emotional issues, divorce, illness, etc.

 

Thinking back about 12 years. The house I live in was a foreclosure I picked up. The homeowner never even advertised or listed it with a realtor. I always wondered why. I guess some people just never think they could loose their home until the writing is on the wall (or in the newspaper legal column).

 

The more I think about it. Investing is 90% about how I look at things (beliefs) and breaking down barriers in my own mind. The deals are out there. I now just need to get off my @#%$$%#$ and make some calls.

 

Thanks again. I will be talking with you shortly.

 

Ed

[MichaelC 160]

The more I think about it. Investing is 90% about how I look at things (beliefs) and breaking down barriers in my own mind. The deals are out there. I now just need to get off my @#%$$%#$ and make some calls.

Worth repeating. Good advice for all.