I’m a bit of a “one-trick pony” when it comes to real estate. Yes, I have really enjoyed learning about and doing several of the more creative deals that Vena and Bill teach (and it is some awesome stuff that they teach, by the way!). Yet, as I slowly integrate these into my repertoire, the majority of the deals I work go exactly the same way; buy the property, and then give a lease with an option to purchase to a tenant/buyer. There are so many reasons I love this strategy, though my favorite is the three different profit centers provided within one single deal!
For example, the $4,000 minimum option fee that one of my tenant/buyer pays is similar to a small fee on a wholesale deal. This option fee is NOT a security deposit; it’s a non-refundable fee for having the option to purchase the property at some point in the future. So, it is your money the moment you receive it! And often times the tenant/buyer will put more down – $5,000 or $8,000 or even $10,000 or more!
If you’ve ever had a well-performing rental property, you know how great the consistent monthly cashflow can be. When your resident has an option to purchase your property (which is only valid with timely payments), don’t you think they might be a little more inclined to pay you on time? Plus, I’ve found that you can typically get 10% to 20% more per month when you give them a lease with an option to buy as compared to a traditional rental!
The third and final profit center is a big back-end check! Like rehabbing and flipping a property, here too, you can receive a large sum of money when your tenant/buyer decides to execute the option to purchase your property. This check won’t come as quickly as if you flipped the property, but three years, five years, or even 10 years or more down the road, when the resident decides to execute the option, you receive a check for your equity in the property!
As cool as these three different profit centers are, perhaps the most rewarding part of the deal is that you are providing your tenant/buyer an opportunity to own their own home when others are not willing to give them that chance. The stories of the people you meet are really quite incredible and touching, and to be able to make such a positive impact in someone’s life is an amazing feeling.
Have you given any of your residents a lease with an option to purchase? If not, why haven’t you considered selling on lease/options yet? It can provide you a fantastic income while also giving a qualified, deserving tenant/buyer an opportunity they can’t find elsewhere.