LEASE OPTION A JUNKER
Are you ready for a super secret strategy that is going to put $15-$35K in your pocket fast? Lease option a junk property. Sure, it’s going to need rehab work, but a small down payment and thirty day billing from companies you have built relationships with is going to minimize your cash outlay.
It works like this. Find the property you want. It’s the worst house in the neighborhood, it looks awful, but it’s got good bones. A lot of these are in foreclosure now, so peruse the lists online to get an idea of your price range. You are looking for anything under 50% of the ARV, preferably in the 30-40% range.
An offer is structured like this: A $1000 option payment with a 30 day close and permission to upgrade the property during that time. The terms of the offer can be extended with an additional monthly payment. Just put it in the contract.
Once the offer is accepted, bring your team in and put them to work. Barring any problems, you should be able to rehab the property in 10 – 14 days by coordinating the efforts of your team.
Next, go to the bank or mortgage broker and arrange an 80% loan with a closing on the agreed upon date with the seller.
Put an ad in the paper or sign on the walk looking for a lease to own client with a $1000 down payment, and cash flow over your 80% bank note. You can also do this online, and even create a landing page for people who want to own their own home to give you their information and permission to talk to them the next time you have a property under contract.
At closing, you collect a check for the difference between the bank loan at 80%, and what you paid to the seller, 40%, minus what you owe to your work crews, 10-20%.
A $50,000 ARV could turn out like this:
Bought for $15,000
Rehabbed for $10,000
Bank loan of $40,000 (80% of ARV)
Profit for REI = $15,000.
How many junkers could you turn to make it a good year? With so many people out of work and so many homes in foreclosure, you really can find dozens to choose from every day. Many of these homes have been built in the past ten years during the recent housing boom and have just sat neglected during the down economy. They should be easy to find, and often a company or owner with one junker house has several they are willing to offload at a great price. Work on your negotiation skills, work on your inspiration skills so that you can inspire their confidence in you to help solve their problems. Real Estate investing can help rebuild neighborhoods, can help improve property values, but it can also help rebuild lives by allowing people to get out from under bad situations, and to start the money flowing into the economy again.
You’re making a beautiful home for someone, and providing a service for your neighborhood, your community and your city. Isn’t Real Estate rehabbing really just a hero’s job?
