How to Finance & Build 10K/month Cash Flow from Rentals!


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How to Finance & Build 10K/month Cash Flow from Rentals!


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Tips for Lease Option Contracts

Here are some tips for sellers and buyers when negotiating a lease option. It always helps to consult an attorney to make sure everything is legit.

  1. Down payment – sellers can negotiate high down payments and buyers can negotiate low. This amount will go towards the purchase of the home upon executing the purchase contract or is non refundable if the purchase contract is not executed.
  2. Option price – sellers can negotiate a high monthly option price that goes towards the purchase of the home. Buyers can negotiate low option prices. Again, this amount is non refundable if the purchase contract is not executed.
  3. Term – Negotiate a term that is convenient.
  4. Extensions – If it makes sense, negotiate extensions.
  5. Trash and leave – If a buyer gets turned down for a loan or for whatever reason cannot execute the purchase contract they may be soured. It is important to negotiate a clause that protects the seller in case the buyer trashes the home and leaves. Consult an attorney to make this legal and enforceable.
  6. Make buyers responsible for maintenance – Absolutely without a doubt make the buyers responsible for maintenance.
  7. Get a home warranty – Get a home warranty, always a smart idea.
  8. Have insurance – Always have home insurance, buyers are recommended to have renters insurance during the lease term as well.

For more information on Lease Options, check out this helpful guide.

This entry was posted in Beginner's Advice, Entreprenuership, Expert Advice, Financing, Market, Ryan's Blog, Tips & Standards, Uncategorized. Bookmark the permalink.

4 Responses to Tips for Lease Option Contracts

  1. Madeline says:

    Hi, I read your guide to lease options. It was great. I just have one question. How do you determine fees related to lease options? (expample: connecting a lease option buyer with a seller).

  2. Ryan Moeller says:

    Good question Madeline. It really is negotiable, you can charge whatever you want but I do not recommend being greedy. The answer also depends on the situation and numbers. Agent commissions are usually around 6% total or for a 100K sale 6K. I would not recommend charging more than 6%, in fact I think 2% is reasonable which is lower than the 3% a listing agent makes. Now, the seller may not want to come out of pocket, but you can apply the buyers down payment towards it. You could do a percent, flat rate, negotiate it for every deal, negotiate part of the monthly rent or option price, etc. I recommend keeping it simple, reasonable and below what listing agents make. It is also better if it does not have to come out of the seller’s pocket rather comes from the buyers down payment. I also recommend you ask the sellers and buyers for others who would be interested in buying or selling. You can even give them some kind of fee or maybe a flat screen TV for 3 referrals that end up in a deal, etc.

  3. Madeline says:

    Thank you Ryan.

    I am new to Real Estate investing and am highly interested in Lease options. Are there any special forms I need to get started beside the standard lease forms? And what tips do you have for a new investor?

  4. Ryan Moeller says:

    You need a purchase contract and a rental agreement. I recommend contacting a lease option expert in your state and/or an attorney as all states are different. My advice to all beginners is to choose one strategy and a few zip codes thus simplifying things and become a master.

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