Posted by Jason on May 22, 2006 at 17:24:33:
I’d be interested in learning more.
How Realistic ARE Lease Options for Newbies? - Posted by Michelle Nightengale
Posted by Michelle Nightengale on May 16, 2006 at 17:56:18:
Hi all,
My name is Michelle. About 4-5 years ago, I got interested in real estate investing – especially the “no money down, no credit needed” variety. Hmmm…
At the time, I was in no position to do anything and I had to set aside the idea. Now, I’m in a much better position to possibly do something. BUT, I still have no money for investing in real estate. I manage my personal finances well, have a steady job and have excellent credit. But that’s ALL I have. 
When I was doing my research, I bought a book titled “Making Big Money Investing in Real Estate without Tenants, Banks, or Rehab Projects” by Finkel and Conti. It was great for detailing the concept of lease options, but it fell far short of actually giving details about putting deals together. As a connoisseur of the “get-rich-working-from-home” racket, I can spot the “Buy-our-book-and-let-us-sell-you-an-expensive-seminar/home-study-course” types from twenty paces. And though the info in the book was well-presented and probably completely true, I feel that’s what it is: a sales job.
I’ve been renting from my dad, who gives me a sweetheart deal. But I’d like to own a home too and I’ve been bitten by the “I-wanna-be-a-homeowner” bug. Problem is, I can’t afford it right now. I live in West Palm Beach, FL where single family homes range from a low of $200,000 to a high of $600,000 and up. (Not counting the millionaires on Palm Beach Island and elsewhere, taunting us poor working stiffs.) I recently looked at a condo conversion just down the street from me and though the sign screamed “Starting in the low $160’s!”, available units were closer to the $190’s. For a 1-bedroom condo! (A glorified apartment. Blech!)
With my modest income, I simply cannot afford even the most modest-priced home at this time. I have no money for a down-payment. Yes, I can save it up. But it will take a long time. But regardless of how much money I put down, if my income can’t support the monthly expenses, then it doesn’t matter how much I put down. (I learned a thing or two when buying my first car. And I bought smart.) And that got me to thinking about real estate investing again.
Lease options particularly interest me. Low entry-level barriers and no rehab projects. It’s a buyer’s market now. But as I learned when I was digging out of debt, no matter how great a bargain somehting is, if you still can’t afford it, it’s NOT a bargain. Period.
With homes taking longer to sell, people who bought more home than they can afford, and foreclosures ostensibly on the rise, is there a way to realistically use lease options to lock up properties and jump-start a real estate investing career?
I’m long on investing research (I’ve read the books), but short on real experience. How can I get started? I can see myself somehow locking up a property. But I have no clear exit strategy. Especially since the market has slowed.
I know my local investors club would be a good resource. But until I’m clear on a real plan for actually DOING something, I can’t justify the fees to join. (I’m famous for buying all kinds of stuff and never DOING anything.) Is there a way to get started and network a little without joining my local real estate investors club at this time?
Can this newbie use lease options to jumpstart her investing career? It seems to me that with homeowners finding it more difficult to sell, a glut of homes on the market and rising interest rates pushing home ownership out of resch for many, lease options would be a good way to begin. What am I not seeing? How do I get started?
Realistic advice only please! No hype. (I gave up the hype several years ago. Can’t stand it.)
Thanks,
Michelle
My story. (Get some Kleenex) - Posted by Tampa Bay Mel
Posted by Tampa Bay Mel on May 22, 2006 at 04:12:35:
Michelle
I’ll try to keep this short, might be hard though.
About 7 years ago I caught the REI bug. I did what most do and started reading books buying courses and attending meetings.
After a couple of years I “bit the bullet”
I had done one deal when I quit my job and took the full time plunge. (of course this was my first mistake-of many,but thats another post.)
Check out the link below
http://www.creonline.com/wwwboard/messages/arc_2000//jul00/80184.html
Its funny, looking back on it now, I would post things like “she got Irate” when she actually was screaming every curse word not-in-the-book at me.LOL
Well by the end of this(got your kleenex?)I was out of the biz. (also had something to do with divorce, and a family member who was addicted to drugs)
PLEASE dont think I am trying to discourage you. I’m not. GO FOR IT-I’m glad I did! I’m going for it again as we speak, err…umm… I mean as I post.
I did learn a few things I’d like to share.
-
BE FUNDED. Things CAN go wrong. My whole business plan was built on the assumption that things would all go as intended, hey thats what my “GURU” told me. LOL If you have to do flips to get funded thats what I’d do-this time. Just my $.02
-
GET RIGHT BACK UP. I should have gone right back as soon as I could, new lessons in hand. If you fall off this hourse jump right back up for another ride-dont wait it only gets harder.
-
If you are dislecix triple check all your paperwork. I guess accuracy is important. Who knew?
I’m sure if it wasn’t 5AM I’d have a few more nuggets but I’m getting tired and might be able to go back to sleep now.
Before I go, I want to stress that I think you should go for it. It sounds to me like you have what it takes. I DONT regret going out on a limb like I did-I WAS SO ALIVE.
Best wishes and happy investing.
Mel
PS
when you start doin’ some deals-keep us posted.
Re: How Realistic ARE Lease Options for Newbies? - Posted by Phil
Posted by Phil on May 17, 2006 at 20:07:15:
Michelle,
I am currently reading a book called “How To Make Money With Real Estate Options” By Thomas Lucier. I highly recommend it. It has alot of website listings that point you to free information. Also he has a website that deals with the Florida real estate market. It also contains forms you can download for free. You can read all the positive reviews on amazon.
Hope this helps!
Good Luck!
Re: How Realistic ARE Lease Options for Newbies? - Posted by no hype
Posted by no hype on May 17, 2006 at 18:11:20:
This is a no hype answer. Imo beginners and/or people without resources should definitely avoid L/Os because they are full of potential problems that can result in a myriad of legal hassles and money problems. Read John T. Reed’s book on lease options if you want to check it out. In fact there have been posters on this Board discussing their real life L/O problems.
If I were you I would instead look into doing wholesaling/assignment of contracts to get yourself going and make some cash. It’s a way to learn your market, create contacts, etc. and make money without needing credit or much money and it has very little risk to you. It will teach you how to find the bargain deals.
Once you learn how to flip wholesale deals, you can then buy wholesale for yourself once you put some cash together. I’d plan on buying a few rentals for the long term even if you only bought one every five years. This means saving up your money regularly just as you bought your car. It’s slow going and not the flashy, easy route promised by the hype types but rentals will eventually provide you with solid assets and a steady income whether you are working or not.
L/O & newbies? A red herring! - Posted by John Corey
Posted by John Corey on May 17, 2006 at 06:31:54:
Michelle,
First, well done on posting something that highlights your situation. That is a good step forward.
Second, I am going to ignore the lease/option question. There is a problem and it is not your income or the local market conditions.
Obviously what you have been doing has not produced much in the way of results. You sound like you are very well prepared to start but have not ventured out of the books yet. Lets say you are stuck in your comfort zone.
I will speculate that almost all of the things you have read will work in the right situation. Creative RE is about finding the exception rather than the norm. The deals are not normal and not like what all the normal buyers and sellers are doing. Expect to have to work and to be labeled as different.
The ‘return’ for not being ‘normal’ is more profitable than a day job. Not as steady of an income as a day job hence most people do not want to try.
RE investing is a business. Like most businesses there is a lot of work before you get to a stage where the checks roll in while you have your feet up.
Read what you have posted. At some level you find roadblocks rather than find paths to success. It is mostly in your mind. You see reasons why things will not work. You also read about people who are doing very well applying ideas that are similar to what you have read in your books. You somehow doubt you can do the same.
Have you seen the movie “What the Bleep Do We Know”? It is about how there may be a scientific basis why people can create their own destiny. Positive thought and new age thinking meets physics. There is a piece in the movie where they show how the brain responds to repeated re-enforcement. You find roadblocks so your brain is trained to spot them. You need to train it to find the opportunities.
How many properties have you checked out by visiting and ‘kicking the tires’? What have you actually done on a sustained basis (more than sticking your toe in the water)?
Your father rents a place to you. Does he have the 1 rental or is he a landlord with multiple properties?
Finding a place to live is different than finding a place that will make you money (short term flip or long term rental income). You need to separate the two. One is your home (and all the emotion that goes with that decision) and the other is a business transaction.
One well known FL investor & author says to rent until you have enough passive income from your rentals to cover the mortgage for a home (he choose to rent for 9 years). You can get more home for the same money as a renter when looking at up market properties.
Stop the spending on the books, etc. Do spend more time with investors who are doing deals. It will rub off. The cost to join a local club is easily justified if you consider the alternatives. How well have you done by spending money on books while not attending regular meetings with active investors?
You want to avoid the hype. I claim the hype is more in your head than in the books. Look at the results. 5 years of getting started. Others who decided to start 1-2 years ago area already much further along. It is easy to spin something and say that the book failed to tell you enough. It is also easy to say the time was not right as if there is a time on the calendar that will be better.
Spin is great as we can use it to justify any outcome we need to justify. Spin is neither right or wrong. It is a point of view. Similar to believing that your car keys are in your coat when all the pockets are empty. You know the keys have to be there even when the evidence says otherwise. Beliefs can be more powerful than the facts.
Have you thought about finding people who have more money than time and being a co-investor? Have you spent any money marketing to possible sellers (marketing for 6 months or longer as repetition is what count with direct response marketing)? If it takes 100 possibility properties before you find a hot lead have you worked 100 dead ends yet?
Obviously what you believe is a ‘reasonable approach’ is not working. Something has to change. You can give up on your dream of RE investing or you need to get on with making it happen. I doubt there is more you will learn from study without action as you have already done the prep work.
You admit to being a professional student. It is very common trap for people considering being a RE investor. There are a lot of possible paths and the larger numbers ($$$) are rather scary. Reading more feels right but actually does nothing to improve the situation after a certain point. Some knowledge is useful but more does not help if there is no application. Fear, Uncertainty and Doubt - The FUD factor is at work here.
In 2001 what were prices like in your area? In 2011 what do you think prices will be like in the same area? Do you want to be in the same financial position that you are now in 5 years? If the answer is yes then continue to do what you are doing as it is working. If the answer is no then you would be a fool to think that more of the same is going to get you where you want to someplace new.
If you really want to hang with people but do not want to pay the fee to join make it into a game to see how many members you can meet without paying. Focus on being creative. Hang out outside the meeting door. Pounce on people so you get their business car and then schedule coffee meetings. Call landlords advertising in the paper and set up times to meet. Visit homes for sale that are being offered by a rehabber to pick their brain, etc. Make it up. Set a goal and then focus on the reaching it before you change course. Another idea - Pull up county records and look for names of people who own more than 2 properties locally. They could be investors worth meeting. At this stage the action is more important than if it is the right action.
RE investing has so many different paths. You will never know what some of them feel like if you continue to stand at the junction waiting for an indication of which path is best. None are best. Hence all will do for now.
Maybe posting was a way for you to get out of your comfort zone. If so, well done. While there is momentum lets see if we can head done a specific path and gets some practical application of what you have been learning for 5 years. Focus on doing 1 deal in the next 52 weeks. Just one deal closed and finished. Even part time you can certainly find one deal if you work at it each week for no more than 6 hours. What else do you do for 6 hours a week that is less important? Eliminate the less important activity for 52 weeks and watch what happens. If everything is important then we know where the problem lies. If you do believe you can give nothing up then skip 1 hour of sleep each day for 6 days until you figure out what is less important.
Post more or send email if you want it private. Force yourself to do something each day in the marketplace (this includes talking to investors and property owners) so that you start creating your future rather than let it happen to you.
I like to say there is no magic to RE investing. Maybe that is incorrect. The magic is you. You are magic. Apply your magic and watch what will happen.
John Corey
build cash first… - Posted by lukeNC
Posted by lukeNC on May 16, 2006 at 23:03:28:
no money or access to money? dont do lease options…
Dont do any deal that puts you on the hook for any loans if you dont have the capital to pay on them in case your tenant and/or buyer fails.
Its doable and very possible to do deals with no loans in your name or doing any borrowing… I do them almost every week.
My way is not popular…I suggest building your cash by learning how to flip. First, find those deals where you can get in and get out and make a great profit with little or no risk of your capital (from your pocket or borrowed).
Once you’ve build up this cash, use it to take advantage of the big time deals, that require cash to facilitate.
Believe me, once you have cash, you can do sooooo much, without worrying about paying back loans…
Re: How Realistic ARE Lease Options for Newbies? - Posted by speednxs
Posted by speednxs on May 16, 2006 at 22:04:38:
Can you answer YES! to the following questions:
Can I find lease option sellers that will agree to my terms?
Hint: Profit = Income - Expenses
Can I find lease option buyers that will agree to my terms?
Do I have the necessary legal documents?
Am I willing to spend the money on attorneys to enforce these contracts if the buyer/seller breaks the contract?
If you aren’t willing to enforce a contract it ain’t worth much. Once you can answer yes to these questions, you’ll feel a lot better about jumping in and beginning your education as an investor.
Good Luck to You
Re: How Realistic ARE Lease Options for Newbies? - Posted by Gerald
Posted by Gerald on May 16, 2006 at 21:05:36:
Michelle, sounds like you’ve put in lots of time, study, etc., but haven’t really found your niche per se. I am a full time real estate investor in Denver, CO (talk about a tough market right now!). I have an idea for you to make some cash on the side in real estate without using any of your own money, as long as you have good credit. This is no hype… it’s something I have tested and I know it works. Please feel free to drop me an email at gerald@coltexproperties.com & I’d be happy to further explain. You can also visit my website at www.coltexproperties.com
Re: My story. (Get some Kleenex) - Posted by hummer
Posted by hummer on June 11, 2006 at 06:08:28:
test
Re: My story. (Get some Kleenex) - Posted by Missy
Posted by Missy on May 25, 2006 at 03:13:27:
I’m there now…yes, I was so overwhelmed last year that me & my
husband bought 2 high end properties in No. California - tried to flip it
within 2-3 mos but never got sold - 9 mos later …we’re still here trying
to make ends meet and we’re at the tip of the string…we don’t know
what to do? we don’t any more funds so we’re planning to go chapter
13…
Re: L/O & newbies? A red herring! - Posted by Gerald
Posted by Gerald on May 17, 2006 at 10:36:23:
John, this is a fantastic post!!! I will direct any newbie investors I know to read this post. I have this same conversation with many newbie investors. I encourage them to “get out of the bleachers” and “get into the game”. Thanks for the post.
Gerald
Re: L/O & newbies? A red herring! - Posted by Michelle Nightengale
Posted by Michelle Nightengale on May 17, 2006 at 09:04:00:
Hi John,
Thanks for taking the time to reply. I think I may have given the wrong impression…
Yes, I have a habit of being a professional student. And I realized that (as you said), that only goes so far. If there’s no APPLICATION, then it’s worthless. So I decided to get it in gear and actually DO something.
But first things must come first and in order to accomplish anything, we must set priorities. I have not been studying RE investing and buying books for the last 5 yers. I set the whole idea aside entirely because there were other things I had to do before I could even CONSIDER RE investing on any level.
While there are some ambitious young people here who are already active in RE investing, I had other worries in my early 20’s. (I’m 30 now.) I was a broke college kid with no car. (Hard to look at properties or be taken seriously without transportation.) I have some severe physical problems which made it incredibly difficult to get a job and thus become independent of my parents and pay my own bills (including paying off credit card debt.)
I’ve spent the last 5 years working to get a job, got one (and kept it), got my debt paid off, bought my first car with half down in cash (MY money, not my parents’), had 2 total hip replacements which allow me to be mobile (otherwise, I’d be in a wheelchair) and am now an independent, productive member of society.
There was a time when I couldn’t even buy groceries (which was when I was studying RE investing in the first place – I was unemployed with nothing else to do). My situation is such that people advised my parents to place me on SSI and other government support and leave it at that. Dad is a bona fide member of the Millionaire Next Door club and he refused to accept that. Consequently, I refused to accept it. And I am MILES ahead of where I was 5 years ago.
It’s important to be realistic and sometimes, we have to do the less glamorous grunt work first to get to a place where we can do the things we really want to do. The last 5 years have been about becoming independent, putting myself in a place to pursue my dreams and a place where I’m not a burden on my parents. A place where I can care for THEM when they need it, instead of them always caring for me. Now that I can buy my own groceries :P, I can actually get back to possibly pursuing RE investing.
So after 5 years, it’s time to take that dream off the shelf, dust it off, and see what I can do. 
I not buying any more books. The ones I have (and am re-reading) are the ones I have from 5 years ago. It’s time to DO something. My desire to own a home is what prompted me to look at investing again. I realize that investing is a business decision and home ownership is a personal decision. So now I’m beginning to study my local market. (I’m otherwise completely oblivious to it.)
Just trying to get started and L/O interested me. That’s all.
Hope that clarifies things. No lectures necessary.
Michelle