In this post I will be going over the numbers and specs on one of my very own Lease Option in Real Estate properties!

If you are curious to know how I established my numbers and property characteristics and also my method on implementation then check out Residential Lease Option Explained.

Also make sure to download your free copy of The Strait Path to Real Estate Wealth to the right of this page in the sidebar.

The house fit my physical attributes:

• 3 bedroom, 2 full bathrooms
• required a lot less than $3,000 of rehab before being livable and functional
• decent geographical area for crime, schools, shopping etc.

The numbers fit my requirements too.

• Purchase price $134,000
• Comparable Market Analysis (CMA) $165,000
• Equity position sits at %18.78
• My mortgage + taxes and insurance $880/month

I placed my brightly colored signs on both approaches to the property and one in a highly visible window. I also had a For Rent sign and a For Sale sign in the front yard. All signs had my phone number on them.

I also posted an ad on my local free advertising site and on Craigslist.com complete with pictures and descriptions. Ads with pictures get lots more attention than those without.

I started receiving phone inquires a few hours after posting the signs. During the phone conversations I never spoke about the pricing of the house but rather invited them to come see it and I reminded each one that I have a very flexible program that can be customized.

I had two showings. Roughly 5-7 people at each showing. These showings were always after 5 pm which is the end of a traditional work day.

While at the showings I invited my guests to wander around the house at their own pace and I would wait in the kitchen.

Once they finished looking around I would answer their questions, hand them a flier, and deliver the information on how my program works!

The informational fliers/handouts had the following pricing table on it.

Money Down | Monthly Payment | Monthly Equity Accumulation
$7,000              $1,000                       $175
$5,000              $1,150                       $150
$3,500              $1,350                       $100

Keep in mind that the pricing is unique to the property and the current market rents in the area for comparable units.

As well as the pricing table I write a brief summary of why a Lease Option or Rent to Own, the way I do it, is so much better than other methods.

I highlight that I can help the tenants build equity much faster than the bank would ever allow. I detail the discount at purchase accruals they can qualify for as well.

I love this next part! I ask them if they would call the bank if the toilet backed-up or the faucet dripped. Obviously the answer is, “No, of course not.” To which I reply, “Then don’t call me either. It’s your place so take care of it.”

We specify in our contract that the tenant is responsible for keeping the property in livable and functional condition. For added incentive we make sure they understand their money down is non-refundable. This helps with accountability and responsibility.

Basically I want to use this flier to “sell” them on the program. I allow them to fall in love with the house and effectively “like” or “trust” me.

I don’t dress like a big shot business man in a suit and tie. I am personable and try to get to know my tenants. If I’m the one doing the management I find it much more effective to establish a relationship up front so later when they have to interact with me they know who I am.

I  then send the contract home with them to “sleep on it”. We schedule another  meeting for contract signing, money down and first months rent in certified funds, and we exchange keys then.

Currently my tenants opted to pay the $3,500 down with a $1,350/month rent. As you can see I cash flow a healthy $470 positive/month. The maintenance costs are VERY minimal because I have the tenants doing it all.

This particular property I’ve had for two years and two sets of tenants. The first ones had to leave. In both marketing instances it took no longer than three weeks to get a tenant in.

Money made so far on money down and monthly cash flow: roughly $18,280

My current tenants are qualified for a mortgage as I write this for $160,200 so when the property sells I’ll make an additional $21,000 accounting for my original money down

Altogether my gross profits on this property which I have owned for three years, I lived in it the first year I owned it, will be $39,280!! Pretty darn good in my book!

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Lease Option in Real Estate – A Case Study By Joe Nielsen