Don’t rent out your house- lease option it
The easiest way to own houses Garden is to lease option, not rent. That way you get a better quality of tenant, more people to choose from, more money up-front, more money each month and no repair headaches. Sounds good, doesn’t it? I usually get $100 per month extra on a house until $150,000; up-front option money is about 3% of the sales price. If the house needs work, I offer Neodymium magnets credit if they do it themselves. If the house is a disaster, then I offer my special, “No money down, you fix” deals (On those deals I get approximately 150 calls a day). If you can get in light, you don’t have a lot of money tied up in fix up costs. Long ago, I learned not to tie up my money in keepers.
Since you get so many calls on these ads, you have to Neodymium magnets minimize the effort expended on your part. The ad is placed in the houses for rent and houses for sale sections.
A typical ad reads a decent house reads:
Rent to own
Cute 3/1 fenced yard. Nice area. Low down
$850 mo+ $100 mo towards purchase
If the house is a disaster, I always clean it first. This is how the ad reads:
Rent to Own- $0 down-
U fix. 3/1 fenced yard. Nice area
$850 mo + $100 mo towards purchase.
Notice that the price and rent has not changed? Slick huh?
You must have a separate number with a separate voice mail. On the voice mail you can give the address and hype the property. Tell them to drive by first and take a flier and look in the windows. At the property is a different phone number, which is my cell. That way you only talk to people who have seen the neighborhood, and seen the house, and know how the deal works. At the property you have a flier that outlines what is required. I have about 100 fliers and check every few days to see if it is empty. Tape one to the window in case someone takes the last one.
Make sure the property is neat and clean even if it needs work. Leave the window coverings open. Check your voice mail regularly because it will fill up fast. Mostly there will be hang-ups. The calls you get back are the ones you will want to talk to. Be sure to take the time to screen the callers. Ask them about employment, who will live there, how much they earn, how long at the present address. Do they have the required option money? Verify that they earn at least three times the rent amount per month. How is their credit? If everything is ok, set up a showing time.
Make sure you schedule several appointments at the same time. Tell them to bring $100 in cash plus $25 application fee in case they like the house. When you have the showing, arrive 10 minutes late. Let them see all the other people there also. Take applications from the qualified ones along with their money. No money-no application. Don’t ask about marital status- it’s illegal.
Every adult gets his/her own application. Date and number the applications. You have to take the first qualified tenant, not the most qualified.
Check out everyone thoroughly. When you have made a decision make arrangements to get the rest of the first month’s money quickly. You would be surprised how many people walk from $100. Don’t take the ad out of the paper until you have ALL the money. Things can go wrong up until the last minute. Return all unacceptable deposits minus the $25 credit check fee. If possible, go to the prospective tenant’s house to get the rest of the money to see how they live. At the very least, look at their car. If there are mounds of McDonald’s wrappers on the back seat, think twice. Look at their driver’s license to see if they are really who they say they are. Take only cash until they move in.
If you really like them but they don’t have all the money needed, allow them to have a payment schedule- in writing- but call it rent-owed. The money they pay first is option money. The money they owe you is rent. That way if they move in and welch, you can evict them for non-payment of rent. It’s tough to evict because of non-payment of option money.
I done this successfully even from out of state. Many times I never met the people. What do I care what they look like. If they qualify, they qualify.
Phyllis Rockower, founder of Real Estate Investors Club of Los Angeles, has been a real estate investor and educator for over 20 years. Viewed as a true real estate expert, Phyllis has had numerous interviews with CNBC, ABC 7 News, Investors Daily, Time Magazine, KCET, Foreclosure News Report, The Daily Breeze, KNX Radio and NPR.
You can follow Phyllis’ personal real estate investing on her blog: http://www.realestateclubla.com/blog.asp
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