Help. Please critique my L/O ad. - Posted by Jerome

Posted by Nick on March 23, 2001 at 22:59:09:

I should have got them to bid on it but I was really nervous about this deal since it was my first one. I had a house that I had assumed in my own name. I took posession of this house on right around the holidays, put the ad in the paper and got all the calls. The problem was the house stunk, I mean Stunk of Cat P. Really Stunk. Did I mention the house stunk? That is how bad it was. I did not want people driving by and stopping in while it smelled that way. So someone would pull in the driveway and I had to hide until they left because I did not want them to smell the house until I got the carpet out and the new carpet in. So I kinda screwed up by putting the ad in too early. But it worked out because within a week I had the old carpet out and the new carpet in. The smell was completely gone. What a relief!!! None of the 7 wanted to negociate on the price at all. After all they mostly all had bad or marginal credit and let me call the shots. During the week that I was cleaning it up I had several RE agents show up to list the house. They said that with the holidays comming up the market would slow down. They all said it would take 90 days to get the house sold with a listing. They also said I should offer the selling agent a bonus to get it sold quickly. This would have cut deeply into my profits with commissions and bonuses. With the rent to own deal I had a contract signed and money in hand in about 3 weeks. I was happy and relieved. The next one I will do differently. This was all part of the learning curve. My profit was about $13,000. I do not claim to be a guru but If you have any other questions about this deal fire them at me. Hope this helps. Nick

Help. Please critique my L/O ad. - Posted by Jerome

Posted by Jerome on March 22, 2001 at 12:22:50:

I own a house I’m trying to lease/option. I placed the following ad in the paper last Sat & Sun, in the main paper for Phoenix. I had only one return phone call. Based on the results I’ve been reading on this board, I expected to be inundated with phone calls. Do you see anything wrong with my ad? Be brutal, I’m here to learn.

Probably $1100 to $1200 would be average rent for this house. But this is a L/O, and I thought we could get premium rents for L/Os. $1260 is exactly what I’m paying on underlying loans, so I’m not trying to get greedy. I just need the payments covered, QUICK! The FMV of the house is $155,000 range. Median price in Phoenix for homes is probably $130,000, if this helps.

I ran the following ad under “Homes for Sale” and “Unfurnished Rental Homes” for the area it’s in.

Low Down! Marginal Credit OK!
Remodeled brand new inside!
4bd 2ba, big 2138sf, great neighborhood
Only $1260/mo! 1234 N Street Name
Open House Sun 1-4. 123-456-7890

Here is what I did. - Posted by Nick

Posted by Nick on March 22, 2001 at 21:56:12:

I advertised mine like this:
Rent to own
3br, 2 bath, 2 car
Woodland area, 105K
303 555-1212

I placed the ad in the For Sale and the For Rent sections of the major newspaper on a house that I had purchased on an assumption. I also had a sign in the yard that said Rent to Own and a phone number. My response was 70 calls in one weekend. About 15 said
they would drive by the house. 7 wanted to see the inside. I made an appointment for all 7 of them giving each about :30 min to see the house. That was not enough time so the people started to show up with others inside still looking at the house. It turned out all 7 wanted the house. They were begging me to sell it to them. I had them all fill out credit applications and permission to pull their credit report. They gave me $20 each for the credit report. I gave it to the one with the best credit determined by a loan officer. We closed 3 months later and I got my check.

Re: Help. Please critique my L/O ad. - Posted by Bob (Md)

Posted by Bob (Md) on March 22, 2001 at 18:20:59:

One comment - there are a couple of people who do L/O’s in my neck of the woods. They advertise in the rental section classifieds, but their ad starts with the following in bold font…

Why RENT when you can OWN???

Then it’s a pretty vanilla lease/option ad.

Re: Help. Please critique my L/O ad. - Posted by eric-fl

Posted by eric-fl on March 22, 2001 at 14:17:32:

People who lease/option houses as tenants are pretty disorganized. Think about it - if they had their act together, they would have just bought a house already, especially at current interest rates.

In my limited experience, I noticed the following:

Placing an ad for l/o under “homes for sale” is pretty unproductive. Those people are looking to BUY, not rent.

Placing an ad for an l/o under the rental section will get you calls from tenants. It’s weird, it’s like there’s a blind spot over the words “to own”, they don’t even see that. I had so many conversations that went like “HOW MUCH?” “You understand this is a lease with an option to purchase the house, and the payment is applied towards your purchase if you choose to buy it down the road.” “What, a lease/what?” They just don’t get it. Trying to convert tenants to owners is a long and difficult road.

I found that the very best place to advertise a lease/option is under the section that says “lease/option”. Weird, huh? If your paper doesn’t have one, tell them they should. I had much better luck when I went this route, especially when I was offering rent credits. People reading this section know what a lease/option is, and what a rent credit is.

Speaking of that, if you are offering a rent credit, that should be in your ad. If you’re not, why not? It doesn’t cost you anything unless they buy. Just increase the back-end price a little bit to compensate.

Also, I’m guessing your ad didn’t net any phone calls, because you took away all the reasons to call! You give the address of the house, and also state there will be an open house! Most people reading an ad like that say, “well, we’ll take a drive by and look at it, if it looks good we’ll go to the open house”. And they never do. I HATE open houses. What a waste of time that was for me. People always intend to go, but something always comes up. Wanna have an open house? Have one. Just don’t tell anyone about it.

What do I mean? Simple. DON’T put the address in the paper. And DON’T advertise an open house. Spend more of your ad talking about the house to hook them. If it’s remodeled, say what’s remodeled, like “brand new kitchen, refinished hw floors”, or whatever. Once they call, after talking the place up, you say, “well, I’m going to be out there on Sunday around 1:00 doing some cleaning and touch-up, can you make it out then?” If they are interested, they’ll say yes. Then, say the same thing to every interested caller. About half of them will show, if they think it’s a “showing” appointment. It’s pretty hilarious to see about four or five cars all pull-up within 5 minutes of one another. People walk in, and you call out from the back “hey folks, come on in and make yourself comfortable, I’ll be with you in just a minute”, as you are showing another couple the house. Now how hot does this house look? You don’t even have to say “I’ve had other people interested”, like everyone else does. They know it, BECAUSE THEY ARE ALL THERE, LOL!

Have a stack of apps and a box of pens handy. End each “tour” by handing the couple an app and a pen. Say something like “now, by law, I have to take the applications on a first-come, first-served basis, but the first qualified person to apply gets the house”, or something like that. At this point, many of them will take the app and step aside, either VERY seriously talking about it, or actually filling out the app and writing out a check for the application fee.

Re: Here is what I did. - Posted by Dave (CA)

Posted by Dave (CA) on March 23, 2001 at 14:45:45:

Wow. Maybe you should have had them bid for it.

Re: Help. Please critique my L/O ad. - Posted by eric-fl

Posted by eric-fl on March 23, 2001 at 08:02:59:

I tried almost the same exact thing, except my headline was to be “STOP PAYING RENT!” My paper wouldn’t do it. They said it was “anti-competitive”, which I guess meant I was being too hard on my competition, who were just offering rentals (wah!) Other investors have had similar problems with other papers. But it is a great headline, if your paper allows competition (I thought we were ALL competitive, something about capitalism, I think???)

Re: Help. Please critique my L/O ad. - Posted by Jerome

Posted by Jerome on March 22, 2001 at 15:36:53:

Thanks, Eric! That was very helpful. I didn’t even consider the open house may have actually kept people from calling, but I can understand your logic. I definately like the secret open house idea. All your ideas were on target.

There is no Lease/Option category in the paper. So, I guess I’m stuck with the categories they have.

Thanks for the help!