Have you ever wished you could have more cash-flow on your lease-option deals? Of course you have! Who hasn’t? What I’m about to share with you has increased my monthly cashflow significantly, and the best part is, all you have to do is ask your tenants to pay it and at least half of the time they do! As I like to say…Craziness!
In case you aren’t aware what a lease-option is, it is simply a scenario when someone who wants to buy a house isn’t able to because of credit issues or whatever. For example, let’s say that someone wants to buy my $90,000 house, I’ll likely get a $5,000 downpayment from the tenant buyer that get applied to the purchase price when they exercise their option to buy. Typically, the tenant-buyer then rents the property until he/she buys the house by getting a loan or paying cash. Now, how to get someone to pay you an extra several hundred bucks a month…
The conversation I have with my tenant-buyers is a 2-step conversation. First, I ask them how much above and beyond the monthly rent they would like to pay if every dollar above and beyond the rent went towards the purchase price when they buy the house. This amount usually ranges from $75 – $300. Then, step 2 comes when I say, “Now Mr. Buyer, I don’t want you to be strapped, but I want to mention an opportunity to you, and I’d like for you to tell me what you think of it. So far we’ve agreed (for example) that the monthly rent is $900 per month, and you just told me that you’d like to contribute an extra $250/mo towards the deposit that gets applied to the purchase price, right? Great. Now let me ask you something, how much more could you pay above and beyond the $1,150 ($900 rent + $250 extra = $1,150) if not only did it count towards the purchase price, but I also matched it dollar for dollar by reducing the purchase price? In other words, Mr. Buyer, let’s say that you want to contribute and additional $150/mo, here’s what it would look like in real numbers: You would pay $1,300 each month with $900 of that going towards rent and $400 of that towards the purchase price, and the purchase price of the house would be reduced by $150 for every month that we did this. Would you like to get involved in this program like so many of our other buyers have done?”
I’ll write out the numbers in a second, but I’m sure that you can already see how beneficial this could be to not only you but also the tenant-buyer! It truly is a down-payment assistance program that works for everyone involved.
I can’t wait to hear your success stories!
- Jim Zasepl
Example after 12 months:
Initial deposit: $5,000
Additional downpayment: $400/mo x 12 = $4,800 additional deposit payed in
Price reduction: $150/mo x 12 = $1,800 in price reduction.
So, at the end of 12 months, this tenant-buyer would have given you $9,800 towards the purchase price which now has been reduced to $88,200.