Real Estate Investing

What is a Lease Option in Real Estate?

What is a lease option? Friend, I’m glad you’re reading this article because today, out of all the strategies that I have used to build wealth from the world of real estate, I’m going to be sharing with you my absolute number one, absolute favorite. It’s called the lease option. So, I want to share with you how I discovered this because years ago, I was a brand-new investor. I hadn’t made the millions of dollars, I hadn’t you know, created the amazing lifestyle that I have today. And I was just starting out. I was nervous but I was hungry. And right now, if you’re watching this I want to ask. Are you hungry? Les Brown, famous motivational speaker and that big rich deep black voice what do I say, “Are you hungry?’And this hunger is this idea of what’s motivating you. If you’re reading this article, I’m going to impart all that I can to show you how to build wealth today in your life.

And literally, the lease option just gets me tickled pink because I’m going to show you exactly how I stumbled on it and then how I mastered it. So, my buddies were also investing at the time and they had already bought several homes. And I had just bought my first house. And they basically said, “John, you need to do a lease option. ” I’m like, “Well, what is that?’ And they described this handmade sign. They said, “We want you to go to the, you know, the supply store like OfficeMax or wherever you get that bright fluorescent poster board. ” You know whatI’m talking about? And they said, “This is what we want you to write. Rent. . . (In bad handwriting by the way. Don’t print this out. Not a professional sign. ) Rent to own. ‘ It didn’t go off the edge like that. But it said Rent To Own. No bank qualifying. And then it had my phone number. That this is not really my phone number. I don’t know how you guys still managed to get my phone number. But I swear, it’s out there somehow and I’m constantly getting a text from you guys. And you’re awesome and I love watching you rock it in real estate.

There’s a phone number and you put this sign basically out there. And bright-colored hideous and you put it on just like a stand and you plunk that in the yard. They said, “You’ll start getting calls like crazy. ” So on my very first house, I’m doing this for the very first time. And I put that sign out in the yard on that on that first investment property I had. And sure enough, I started getting calls. “Tell me about the house. ” And they had instructed me, “Don’t answer questions on the phone. Go bring people to the house and then do an open house. ” So that next weekend, I had an open house. I had a few families walk on through. And they said, “well, what is this?” and I was just following what was given to me and then I’m the rest. And basically, I said, “Well, rent to own means instead of renting and stop wasting your money. You can buy it. ” I own this house. I’ll be the bank and I’ll help you buy it in a few years. And that definitely had an attraction to a lot of people. So, they would walk through the house. They have fallen in love with that. They get excited and then they basically said, “Okay, so how does this work?”

I want to show you the flyer. I’d put this flyer together and this is what I had learned. Now, my mortgagee, what I want you to understand this. I got a sweet, sweet, deal on this house. When you do a house, you should always have a sweet deal. You should always be like freaking excited about the numbers on the deal. So, I got this house and I purchased it for a hundred and fifty thousand dollars. But on this exact house, it actually had a value of around $230,000. So, I was excited because the difference between 150 grand and 230, that’s an $80,000 spread. Like, I felt like I hit the jackpot. Like, that was way, way, way, way, way, more money than I made in a single year at the time. So, I’d found a good deal. When I actually bought it, my mortgage payment was just under a thousand dollars a month. Now, young, dumb, college kid trying to figure out what he wants to do with this life. No real career path. Starting on this real estate journey. I had an extra thousand dollar a month payment overhead in my life. And that was kind of nerve-wracking for me.

But I was optimistic. So, this is the flyer that I put together. It said no. But you know, rent to own, no bank qualifying and this is the exciting part. It basically said, you could all you could pay $3,000 as a downpayment and you could have a payment of $1,600 a month. Or you could put $5,000 down and you could have a payment of 1,500 a month. Or you could put $7,000 down and you could have a payment of1350 a month. Now, check it out, dude. Zoom in on this. I want you to see this. $7000. My payment was a thousand. So if someone gave me seven grand upfront, I was still going to have a $ 350-month cash flow. 1350 minus the thousand. So, I’ll put my cash flow here. This is going to be three hundred and fifty dollars a month. Now, to a young, dumb, college kid, $350 a month was enough to pay for like a car payment or to actually pay down debt or to buy school books. On this one, if they gave me five grand, I was going to make $500 a month.

And I’m like, “Freak yeah!” Or if they give me $3,000, I’m going to make $600 a month. Now, check it out. The family that actually got this house, they gave me $3,000, they started paying $1600 a month. I was making $600 a month cash flow. But let me ask you. Do you really care if they put more or less down and if they give you that kind of cash flow? I’m just telling you right now, you don’t care, it doesn’t matter. It all amortizes out and works out to the same in over 24 months. One of them will be slightly bigger than the other but the real big deal here is that you’re getting paid a big chunk upfront non-refundable. They’re committing to entirely take care of the house because that’s what a lease option is. Plus you get a really juicy cash flow. This family didn’t buy this house but the next family did. And on that house, I made over$100,000. In fact, my sold that made $130,000. AndI’ve made a lot of good money in real estate.

This strategy is like seriously it’s the number one, it’s what works for me, it’s what I love about it. Now, I want to share with you one last thing that you need to know about what a lease option is. In real estate, when you have a home, you’re going to rent it, you’ll have a rental contract. What we’re doing is we’re adding a special second contract called option to purchase agreement. And what they’re going to do is this is the standard rental and this is the biggest air people will make in real estate. In that same document, they’ll add the language for the lease option. In most states, that will actually qualify as the tenure of ownership in the home. And if they actually can’t buy the house, they would actually have grounds to sue you or make a legal argument to get their money back. What you need is a separate document and this document is the option to purchase agreement. With the option to purchase agreement, what you’re going to do is that’s where you’re going to say, “You’re going to give me this amount down and this is the terms of that agreement here’s how long you have. ” You need the two agreements.

I’ve pioneered it, most people don’t have it. It has kept me and my clients legally safe. So you need to understand, the lease option is awesome but there are wrong ways to do it and there are right ways to do it. Payment calculators, what you should charge, and rent. How to find the deals, how to even buy real estate on lease option without needing to put any money down. I share all of that with people when I actually mentor with them. And I would tell you as a final bonus here that if you’re going to get in the game of real estate, you need a mentor. You need someone that will come into your life that will actually show you the ropes and I’m all set up to do that for you. So, if you’d actually like to join my real estate community of thousands of investors. If you want to learn how to and buy the best real estate in the country and you want to learn a strategy.

That is 250% more profitable than regular rentals. Today’s information will hopefully get you started. I got valuable content coming out every month where I’m going to be teaching you new things about how to make the most money you can in real estate because at the end of the day, my friends, you want to be free. That freedom, you can’t put a price on it. And these jobs keep us landlocked working 40, 50, 60 hours a week versus being free. And so real estate, it is the best pathway to freedom. And I invite you to take me up on learning more about exactly what that looks like.