Thread: The Tenants Upgraded the Home?

Fellow Creative Investors, have you ever heard of Tenants upgrading a rental property? It's unheard of and frankly kind of stupid on behalf of the tenants right?

Well in this case that's exactly what happened. I will get into that in just a minute.

I found this deal in the Sunday paper under the "For Rent" section. The ad stood out to me because the numbers was an out of town number. This told me the owner was out of town and the house may be sitting empty.

My suspicions were right. The owner moved out of state because of her job. Perla, the owner, had been wanting to sell the home but could not find a buyer so she realized she had to rent the place to prevent paying the mortgage on this property while renting/buying another. And she was not very excited about putting a renter in her home, she was still attached to the home since her kids grew up there.

I used the G.U.T.S sales techniques to first see if she was in a position to do business in the next week if I could show here a way to get a reliable tenant in her home who would take care of the minor maintenance and pay her on time every single month.

Perla said "Yes Wally of course, I would love to know how to do that".
I then told her "I'm a real estate investor and I specialize in lease purchase, are you familiar with that?"

She had some idea so I explained how my company would control her property for 2 -5 years. I would place a qualified tenant her her home who would take care of it like it was there own because they would plan on purchasing the property at a later date.

Before Perla and I got off the phone we had agreed on all the terms of the deal, see blow. I told her I could fax the contract to her and she could return it overnight or via fax. But she was going to fly in for the weekend to see her son anyway so we set a time to meet at the property.

In the mean time I put out a yard sign and placed a single ad in the paper under the "For Sale" section:

RENT TO OWN
100% Rent Credit
$1050 a Month
Option consideration required
Address/phone

My phone rang off the hook as they always do when I place ads like that. I have everyone go by the property before we talk about the terms, it saves me time and gets the prospects excited about the property. Look at the house (on my blog leasepurchasesolutions), I always deal with nice looking homes.

Then when prospects call me back we talk about the terms. Again I use G.U.T.S before we start negotiations so we are not wasting time.

I had a couple who was very excited about the house and said they had $5,000 as option consideration and wanted to get in the home right away. We agreed on a time that just happened to be 2 hours after myself and the owner was going to sign the contract.

I met the owner at the property and signed the contracts, I received the keys and she left. This was the first time I had been in the property and realized the front patio area (the area behind the wall you see in the picture was open) needed some cleaning from the dust and leaves that built up there. So I went to my truck (Parked in the driveway as you can see) and got my broom.

I went and got some lunch, two tacos and a soda at the nearby Jack In the Box (a Southwest thing). Then returned to wait on the new tenants. When I returned they were there waiting for me, NICE.

As they looked around the property they started talking about things they would like to change, knock down a wall to open up the family room, replace outdated windows etc. They asked if I would mind. I told them I would ask the owner, who later gave them written permission to replace the windows.

Ya, the tenants paid about $3,000 to have several windows upgraded throughout the house. It does happen in Lease Options.

Now, the tenant/buyers knew they needed longer than one year to be in a position to purchase this property. So we did some negotiation. I already new they had at least $5,000 to get in with so I had the information I would need before I considered negotiating the terms.

Normally, on a deal like this, I would ask for $3,000 (non-refundable option consideration) up front, $1,050 rent ($150 a month positive cash flow) and increase the spread enough to offer 100% rent credit as long as they pay rent on or before the first of the month. And I would only offer a one-year lease.

Since the tenant/buyers needed more time I sold (assigned) them the same exact contract I negotiated with the owner. They paid me $5,000 for the contract. Now they deal directly with the owner.

Break down:

I leased the property for 5 years and put $0 down.

The terms were:Lease duration: 5 yearsPurchase Price: $98,500Rent: $900

Three hours later, I met with the new Tenant/Buyers

The terms were:Refer to my terms with the owner. I assigned the contract to the tenant buyer for $5000 cash. The entire deal took me about 1.5 hours of negotiations with both the owner and the tenant/buyer.

On to the next deal ;0)

Wally Carmichael
Google wally carmichael lease purchase for other articles and Lease purchase benefits I've posted.