Wet Feet - Online Marketing and Real Estate Investing Blog

Let’s be hones, the current lending situation sucks. Sub prime lending industry disappeared literally overnight, banks stopped giving out loans to everyone and their sister. The situation is such that if your credit is less then perfect, no bank will lend you money to buy your own home. So the only option is to rent? Not exactly. There are still couple ways to make your dreams come true. Those creative solutions are: lease option, take over payments and owner financing.

Today we will take a closer look at the Lease Option, also called Lease Purchase or Rent to Own. Like name implies there are two ingredients in this cocktail.

First ingredient is the lease. You are renting your dream home and get to enjoy almost all of the benefits that home ownership offers. You can try out the schools, shopping and dining in the neighborhood and the home itself. This lease period gives you time to improve you credit situation to be able to qualify for an excellent loan.

Second ingredient is the Option. An option give you an exclusive option to buy the home for a set period of time – the seller is obligated to sell but you are not obligated to buy. So if after living in the home for 6 months you realize that this is not the home for you can walk away and not buy this home. The downside of doing this is that you loose your option fee which is non refundable.
The only difference between Lease purchase/rent to own and the lease option is that you are obligated to buy at the end of the lease period in lease purchase case.

To get into your dream home on a lease option program require a little bit of capital up front. Option fee is from $3,000 to $10,000 and largely depends on the price of the home. Expect to pay $3,000 for a home around $150,000 and closer to $7,000 for a home worth $300,000. Do not forget that the rent is paid in advance, so you will have to come up with first month’s leas payment at the time of move in also. If you do not have full option payment amount, part of can be spread out in terms of monthly payments.

As far as monthly lease payments, expect to pay market rent with no money going towards purchase price, but you may elect to pay extra to accumulate bigger down payment for the purchase day.

Next time we will tackle how to buy the home by taking over payments on existing financing.

From time to time i bump into investors who want deals on a silver platter, zero down and no need to borrow money.

I would like a dozen of those too, but I have to disappoint you - buying a home with no money down and without getting the loan is impossible.

You either:
A. Buy with no money down by getting a loan and including closing and acquisition cost into the loan or
B. Buy by taking over payments and do not get the loan, but pay the closing and acquisition costs.

To buy a home you will have to close and that means attorney fees, recording fees, transfer tax, title search, title insurance and other misc. fees have to be paid by someone. You would like the seller to shell out couple grand to give you their house, would you? I would, btu have not met such owner yet.

And to acquire the property you have to market to attract sellers, go out research the property, make offers, negotiate with sellers, sign the contract, do due diligence on the property and the loan. All this takes time and money. even if you do it all yourself you will have to spend money. If you go with the real estate agent it will cost you even more, 3-6% of the sales price.

So when I say I will bring you a deal on a silver platter, but you have to choose… either it is A or B - you can not eat your cake and have it too.

The most important thing is to take action. Stop wining and looking for excuses, get off your but and do it. If you put your mind to it you can achieve anything you dream up.

I came to USA in November 1998. I had one suitcase full of my earthly possessions and $200 in my pocket. I came from a small country on the Baltic Sea called Lithuania (Lietuva). Long story short I was not born with a silver spoon in my mouth. Everything I have I had to work for. Life was hard in the beginning, no job, no car (and you need to have a car in Atlanta to drive to work) no credit history, new country and new language.

About one year later my wife joined me here. In 2002 we bought our first home in which we still live. Sometime in 2004 I picked up a book by Rober Kiyosaki called “Rich Dad, Poor Dad” and our journey into real estate investing began.

Being a curious person I started reading everything I can find about real estate investing. I found tons and tons of information. I found out that there is million and one way to make money in real estate, but I was not able to find any single source of information which would outline all steps. There was no step by step guide to real estate investing. People who wrote books never did it in practice and the infomercial gurus did it so long ago that it did not matter anymore. So you have to create your own step by step manual on how to invest form all the bits of information you learn.

One thing is clear by now - there is no get rich quick way, even real estate investing is hard work. It is hard work but the pay is good too. Anyhow after about a year of reading books, internet sites and message boards we bought our first rental property.

The best thing about it was that we did it. We took action, we started on our path of financial freedom, but we never stopped learning. I constantly talk to people about investing, listen to their advice, buy books and tapes, read and post on message boards. So education is a good thing, but it all comes down to one thing - can you actually do it? Can you sign on the dotted line?

So you decided to become an investor. Or to be more precise you want your money to work for you instead of the other way around. Great! So you think that real estate is the way to go, and I would agree with you. You see, population grows, but the continents don’t. So we have a situation where supply is limited and demand is growing constantly, which means that over time all real estate will appreciate which means that no matter what you do, you will come on top, if you wait long enough.

Now that we agree that the real estate is definitely worth investing into, let’s pick which path in real estate investing YOU want to choose. There is uncountable number of wait to invest, each with different rewards, involvement levels and activities required. You have to ask yourself what are your investing goals and how much time you can dedicate for your investment carrier.

If your goal is to quit your day job and to support you and your family form real estate investing you must choose different path then if your goal is to accumulate enough for your retirement and cut down on the amount of taxes you pay Uncle Sam each year. Buying and renting a house or two a year will not produce enough income to support you first five to ten years and buying and selling will do nothing but increase your tax footprint. Buying and renting homes will require less time and day to day involvement from you the buying and selling homes.

So think about your goals for a moment and write them down. Those must be concrete and achievable goals like “I want o have 10 rental houses in 10 years free and clear” or “I want to become a full time real estate investor in 1 year”. If you do not write down you goals the are just thoughts, so write them down and work on the plan how to achieve those goals.

You have chosen your path. Now you have to walk it.