To get started to the fastest possible start with the least amount of money, how do I get started?
It is my opinion that the fastest possible way to get started is helping sellers that have very little equity.
There Is 20 million of these houses, 20 million. If you’re in an area in United States with good affordability, meaning you can rent a house for 600 – 1500, and you can buy houses from 50,000 to 250,000, then you’re in a possible seller financing market. This means that the rent compared to PITI is reasonable.
You can help the seller sell on terms and save some money for the seller, then you can take that house and rent it out for positive cash flow or lease it with an option
Say you have a $100,000 house with $95,000 against it, seller has to leave soon, market rent is $800, PITI payment is $600
You can make 3% by putting together a lease with an option or a lease purchase
1.enter into agreement with the seller as a principal with your LLC. It’s helpful to be licensed if you do these. You don’t have to act as an agent to enter into an agreement, you act as a principal.
You just state to the seller that your licensed and your entering into this agreement as a principal.
Why get licensed? Well when you flip lease option contracts in most states, the state run agency that governs real estate agents really want you to have a real estate license. They don’t care if you flip the contract, they care if you been properly trained. ????
I train students all over the country and its just helpful for you to be licensed.
In Ohio, Florida, and California, it’s really important to hold a Real estate sales license doing seller financing. The Department of Real Estate is aggressive there in those states
Finding a real estate broker that you can work with isn’t easy, because they like to be able to control your work behavior, but there’s many places that will allow you to hold your shingle, meaning your license, and you have the regulations covered.
2. Once the seller agrees to do the lease with option or the lease purchase, you then need to sign a letter of intent, that spells out the terms. This isn’t binding, but it allows the deal to move forward. You can then direct the seller to go down to the title company or lawyers office and enter into the lease with option or lease purchase, getting their signatures notarized.
3. Once you have a legal agreement that you can assign, you then market for tenant buyers. I’ll do a whole post on marketing for Tenant buyers later on in another post. It’s important to find the right person for that house that can get the mortgage.
4. But so let’s say you found a tenant buyer, if they have the right income, you need to get them checked out by an RMLO.
An RMLO is a registered mortgage loan originator.
5. If you’re in Texas you need to do your homework. @John Jackson on this board is done over 500 lease-option assignments in Texas. I trained him in 2002. There’s nobody better in Texas.
6. There’s other states that have unique laws, Louisiana and North Carolina. So we have to do you due diligence about seller financing and lease-options.
7. After you get the tenant buyer to be checked out by the RMLO, and you have a letter that says that if they pay down debt or improve their FICO score over two years or whatever, they should be able to get a 3% FHA mortgage, you then have a tenant buyer deposit into the title company or’s office
3% assignment fee to you
first and last months rent to seller
Sign an assignment contract
8. I think it’s important to get the tenant buyer to get all the money in, so you need the title company or lawyers office to cut a check for first and last months rent to the seller, and a check to you for the 3 % assignment fee.
9.To have a good attorney that acts for you and helps you in this area is important.
Don’t try to do it yourself.
There are too many things can go wrong
So I’m going to say in closing here that you are helping a “no equity house” so sellers tried to sell with an agent, it didn’t work out.
So the sellers talk to you about about a lease to own solution where they enter into a lease with an option with your LLC and then you assign the deal for 3% fee for yourself.
Does that sound like a lot of work for $3000?
If you get your systems in place you can get this done in 10 hours or $300 an hour.
If you got a house that has a more expensive market like 300,000 FMV, then you make $9000 a house on your 3%.
Lease Option Assignments are a lot easier than the wholesaling business in my opinion. You should be looking for problems with sellers, focusing on expired listings, which is cheap marketing.