What happens when a Lease Option comes to fruition

Posted on Tuesday, September 30 2014

We’ve just had a tenant buyer exercise their Option to Purchase and buy their home from us. It feels good to know that we have helped this family gain their own home and man are they excited.
We bought the property two and a half years ago from a stressed out vendor for a good price; her kids had kicked holes in the walls as they moved on out and needed a quick sale.

We redecorated the inside, replaced the boundary fence and signed up the tenant buyer at the registered valuation on a three year Lease Option.
When the tenant buyers came to us they had some serious credit card debts – lenders wouldn’t touch them at a time when they were giving money away.
Importantly both had full-time jobs and earn just above $100k. The mortgage broker we sent them too gave us the thumbs up for the 3 year term provided the credit card debt disappeared.

One thing we noticed with this couple is that once they entered into the Lease Option agreement their spending habits changed dramatically. They had a goal, could see it and went for it; it was real and was theirs.
The tenant buyers were gaining around two and a half times the principal portion of a mortgage in weekly credits. This allowed them amass over 10% equity in the property.
Now the bank has happily given them a loan.

For the investor who has the good contracts and knowledge, it is possible to receive more than market rent each and every week; thereby gaining some really good cash flow.
In fact I just worked it out again – from this one deal we’ve made after all expenses $63,000 over the last 2 and a half years; not a bad return on the $4,000 we spent from our own pocket; especially considering the environment of a declining market. Plus we now find ourselves in an environment where there is good demand from folk wanting to Rent to Own and there are good property deals to transfer the mortgage to.

So that’s what happens when you mix good systems with good paper work and quality cliental. Win – Win situations are created and everyone receives the result they were after.

Trust me if we can do it so can you; we live in a small town where one third of the properties are holiday houses. I can only imagine the potential number of deals one could put together in a larger town.

If you don’t have it, go and gain the knowledge and the good agreements and make yourself some extra cash flow – you’ll pay for the learning within the first week of your first deal.

Have a great day
Jay Bennett

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