Posted by Bill K. (AZ) on June 14, 1999 at 02:54:56:
William,
I’m so new to this that I can’t put my finger on the “best” way for me yet.
My first preforeclosure opportunity came when an out-of-state owner called in response to a lease/option flyer I mailed out. We quickly determined that lease/optioning wouldn’t work in his case. We looked at other possibilities, and, eventually, I just reinstated his loan and took title to the property “subject to” the deed of trust.
My next set of responses came from a door hanger I had distributed to 10,000 homes. The door hanger briefly describes lease/optioning and some of the scenarios under which a seller might want to consider it. I have a preforeclosure deal in the works from that, and I’ve sent my lease/option brochure to 8 other potential sellers who called. I don’t know if those 8 are preforeclosures or not. I haven’t heard back from them as yet.
I got a referral on 2 properties from another investor, and several nibbles based on data from the MLS.
And, finally, my partner and I found an agent who goes to foreclosure auctions. We are closing this week on a preforeclosure property he knew about.
So, I don’t find them. They seem to find ME! All I know is that when I advertise for one thing, I get responses for another. Strange stuff, but I’ll take a deal no matter how it finds me.
One advantage of L/O is that they can take little or no money out of your pocket, they are doable when there is little equity in the property(newer prop.) and the risk is reduced. These are all things appealing to a new investor. If you have good credit and can find deals at 65-70% of value you can make money too. If you are into MH’s to can make great returns over relative short time periods.
Take a little bit of money and a lot of knowledge mixed with the right activity you will be successful. A lot of money and no knowledge with the wrong activity you may well stagnate or lose money. There are many people out there that buy below market and L/O as an out. There are some that take subject to and sell on L/O. What you want to do is learn how to do it then do it again and again. L/O aren’t always the best for beginners but they are one of the ways that everyone can make money.
I Can Say with Certainty…It Depends! - Posted by Bill K. (AZ)
Posted by Bill K. (AZ) on June 14, 1999 at 02:24:13:
Jason,
I’ve only been a real estate investor for 4 months. I’ve spent a lot of time on this board, studied a couple of courses, looked at over 20 deals, completed my first deal, I’m into my second, and I’ll share with you some things I’ve picked up.
Some folks work mobile homes and find those to be the best for them. Some buy and sell paper, and wouldn’t want to do anything else. Still others rehab and flip. Additionally, some folks make a good living by finding deals for other investors and collecting “bird dog” fees.
Since you asked specifically about lease/options, here are a couple of ways to structure them.
“Sandwich” lease/options leave you in the middle between your seller and your tenant/buyer (T/B). This method provides you with some up-front money (option consideration), monthly income (difference between the rent you pay the seller and what you collect from your T/B), and backend money (difference between what the seller has already paid you and your option price with your seller). With a “sandwich” lease/option, you could be in the middle for a year or so.
“Assignments” of lease/options occur when you find a T/B to stand in your shoes for the lease/option you’ve negotiated with your seller. In this case, you get a chunk of money up-front from the T/B, you get the seller to release you from liability in your transaction, the T/B takes over your position, and you move on to the next deal.
As you can see, one method gives you more cash up-front and gets you out of the deal quicker while the other method makes you wait a little longer for the total payday. The “best” method depends entirely on YOUR goals, desires, wants and needs.
Having said all that, let me also state that it is MY belief that anyway you can get into the real estate investing game is the BEST way! I started looking for lease/options, but I’ve yet to put one together. Most of my opportunities are with preforeclosure properties, and I see so much potential with those that I’m not really concerned with trying lease/options right now. If a lease/option opportunity comes along, I’ll try to snag it. But, don’t limit yourself. Learn as much as you can about various aspects of investing, and you’ll be ready to utilize whatever investing technique is currently working in your market and for your goals.
I know you’ll get other posts, but I hope that my little bit of knowledge helps.