Real Estate: Tips on Lease Options

One of the best ideas that I have used when trying to get a lease purchase deal closed uses an alternative type of option consideration/ earnest money deposit. If the seller is okay with the idea of a lease option or lease purchase but thinks my consideration a little too low, I simply ask him how much exactly he needs. Once I get that figure my reply is something like this:

"So if I could give you $X as consideration, then you would be able to go ahead today?"

When he says yes, I offer to use all or a portion of the original consideration/deposit to purchase a zero coupon bond (not subject to state or local tax usually) that will be worth X in X period of time. Really, any type of financial investment will work here.

It is easy to show the seller the value of say $3,000 in x years when you have a Barrons financial news with you. I have paid for the brokering fees associated with this. Using this method, I have been able to turn $1,000 into $2,500 for the sellers option consideration/deposit. This works nicely with higher priced properties, since the sellers can understand the concept.

In addition, all of my lease options to a tenant buyer include a clause requiring electronic funds transfer of the monthly rent and option consideration. There are two types of services I use.

One allow a third party service to draft the tenants account, I am sent a postdated check every month so I can cash them myself. I pay $1.50 per transaction. The other uses true funds transfer from one account to another. This can be done on your own PC.

I also avoid future problems for tenant/buyers qualifying by NOT giving monthly rent credit. In instead, they pay monthly OPTION consideration. This prevents the bank from questioning the rent as being fair market or above.