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lease options takes too long to accumulate wealth and it's difficu

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I spoke with an experienced investor who use to do lease options, but not anymore. They are now in wholesaling.

 

This is what they warn me about lease options:

 

Our experience has been that it takes too long to accumulate wealth and it's difficult for sellers to understand.

 

What do you say about the comments?

 

I do see a lot more ppl are in wholesaling, flipping or land lording when they get into real estate investing rather than lease options.

 

Just want to hear what you guys feel and have to say.

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I'm an experienced investor, 20 years or so, primarily using options and lease options as my investment strategy. I disagree wholeheartedly with the above sentiment for many reasons.

For starters, you can easily and safely wholesale a property using a Pure Option. For example, you found a desperate homeowner, (and that's what it takes to wholesale), who is willing to sell his junker in a war zone, (and that's the typical wholesale property), for a huge discount. The traditional wholesaler makes his offer and may very well be required to put up $1K or so in earnest money deposit. Then you need to find your buyer. What if you can't and you are obligated to follow through on that purchase? You can back out of the deal, but you'll face possible legal repercussions, not to mention the damage to your reputation if this becomes your norm.

With the Pure Option, I pay nonrefundable option consideration in the amount of $1. $5 if I'm in a generous mood. No risk to me. If I can find my buyer, great, I have my deal and pocket the difference in purchase price. If I can't find a buyer, the option expires and the deal is done. No harm, no foul. And by the way, the Pure Option can be non-exclusive, meaning the homeowner can still attempt to sell his property during the option period. Think that'll help you get the deal?

 

 

. . .Our experience has been that it takes too long to accumulate wealth and it's difficult for sellers to understand.

 

It takes too long to accumulate wealth? Sounds to me like this other investor is selling a get-rich-quick scheme? Is he? Considering that in the example I just gave above I can wholesale a deal with the same numbers, how can one strategy be a wealth builder and the other not?
If it's difficult for sellers to understand, then the investor doesn't know the product and is doing a poor job of explaining it to the homeowner.

 

In addition, lease options offer a variety of types of strategies that fall under the lease option umbrella. So if one type of lease option doesn't work for the homeowner, we can utilize another. With wholesaling, you make your .35 on the dollar offer and if it isn't accepted you're done.
I've said this many times and I'll say it again: wholesaling is great in theory but damn difficult in reality, particularly for the new investor. How many n00bs can negotiate a deal at a 65% discount? For most investors, particularly new investors, options and lease options are a much easier and safer path to getting started as an investor.

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Sorry I had to laugh a bit. With just about any type of RE investing you can translate it into a Lease Purchase technique or strategy. I like buy-and-hold, but I hate banks and putting my butt on the line for financing and using my credit. Buy-and-Hold is a bit more of a hassle, yet the potential profit over a longer term is pretty awesome. So Sandwich Lease Options are my favorite. Not to mention the passive income keeps working even when I'm not. For a new investor I think the best thing they can ever learn is how to invest in real estate without banks as a crutch. :)

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Yes, Michael, I do agree with you on wholesaling is hard to begin in realty.

 

But what you do with houses needs rehab, owner is late on Payment or taxes?

 

Can you still lease option it?

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No one strategy is going to fit every potential deal you come across. For example, a lease option is not a good fit with a homeowner who is upside down by a large margin, or who is in preforeclosure or has tax liens. You will find deals that are yours for the taking but aren't suitable. When this happens you need to take a different approach to make the deal work, or walk away.

As far as fixers and lease options, I have found that to be a good fit, depending upon the numbers, of course. I have advertised fixers via Rent To Own and my phone has rang off the hook.

I have taken control of fixers via a lease option, made some repairs, then sold for a profit. Every deal is a deal unto itself, and requires we do our due diligence as to how it will fit our plans.

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Being a transaction engineer is the secret. You need a tool box.

 

A pretty house thin deal 80% - 90% LTV is a sub2 or lease option assignment or MAYBE a SLO.

 

A pretty house kinda thin deal 70% - 80% LTV is a sub2 + note or lease option assignment or a SLO or SLO equity split.

 

Rehabs are option flips or JV w sellers (JV agreement, you do not buy it, you do the rehab, put a lien on the property, sell it and get paid when it closes.)

 

To be a transaction engineer the meeting with the seller has to be a great "Mind opening" experience.

 

Here is an audio about negotiating with the seller with a handwritten 3 column explination.

 

http://www.screencast.com/t/oEf3oG7lz

SalesPresentation-SellingHomeOnTerms.jpg

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