It has been said that, “the devil is in the details. We, at “Little Pink Houses of America” have developed a needed and profitable business model that can be practiced in your own community where you can build a $10,000/month income. We call it our Executive Lease-Purchase program.

We discovered that only 20% of a given market has the ability to qualify for a house purchase from a traditional lender. Yet, home ownership is still seen as desirable by a majority of people in the United States today. There is a big gap in the market between those that want a home and those who can qualify for a mortgage. There are many reasons for this: credit problems, another house to sell, moving etc.

We’ve discovered a very lucrative niche in the market that helps those who can’t qualify today, but through our program of matching buyers who need some time to qualify and sellers who have not been able sell their home, a workable solution through our executive Lease-Purchase program. When we match buyers who can’t qualify today but will in the next 1 year to 3 year period with our help and sellers who can’t sell in a traditional way right now, we receive a $10,000 plus fee. Here’s how you can too!  

1.    Be a “Gunslinger”: The second I stopped worrying about how I sounded and what I said and had the guts and confidence to just throw offers out there and not really caring what happened, the deals all started falling into place. Throw your offers and proposals out with confidence! A lack of bold decisive action is the number one reason people don’t get contracts!

a.    Posturing is IMPERATIVE: This is another key psychological negotiating tool!. You cannot sound like you need them more than they need you. You should care less about any offer on any property. It’s simply just a piece of inventory. Worst that can happen is they say no and go pound sand. Oh well, there’s always another deal!

b.    Fake it til you make it: Before you know it, you will have all the confidence you need to be successful. Until then, act like you are competent and confident. That comes across to the people you deal with. Confidence attracts good deals! This is simple, but sound advice, especially in your early days.

2.    Be Creative with your Sellers: There is no perfect deal and you can’t make money on deals you don’t do. So, even if the seller wants terms that are, in your opinion, not real favorable to you, AGREE to them anyway, even if that includes sharing the deposit. Be flexible! The key to making money is often compromise.  You just want the chance to take it to market. You can tell the seller the terms upon which you have agreed are not the best for a quick sale; however, you never know how the market will react, and, most importantly, you just want the chance to see what price the market will bear. In the end, the market’s opinion is what counts. Whatever the market brings to you, you will bring to the seller. All you are doing is leaving the door open for you to bring offers to the seller. This includes the potential renegotiation with the seller once you find a buyer.

a.    Try and get a contract on every deal you touch: Not every seller you talk to is worth putting under contract. But, if you take this mindset with those sellers who are willing to sell on a lease purchase or with owner financing, you will have lots of great houses in your inventory. When you have lots houses in inventory you have the potential for consummating more deals and thus making more money.  

b.    It’s a Numbers Game: The more homes you put under contract, the more chances you will have at making money. And you will build a heck of a buyers list along the way.

c.    So negotiate every deal the best you can: And if the terms you agree upon are at the very least, “marketable”, then get the deal under contract and take it to market.

3.    Deposits vs Assignment Fees: It is much easier to sell these deals when you can give the buyer full credit for what they put down, versus, reflecting it as purely an assignment fee if/when they go to finance; rarely, will you ever get a really large deposit without giving the buyer credit for it. You can acknowledge the assignment fees in a separate addendum at closing and not reflect it in the price. But when you can knock it off the price, it’s a much easier sale. Just add $10,000.00+- on top of the mortgage balance for your sale price (or more if there is some equity and it’s not already too overleveraged).

4.    90 Day Initial Term:  Here’s what I tell a seller: “ I am so confident I will find a buyer that you will ultimately approve within the 90 day period, but if, for any reason I don’t, the seller can simply tear up the agreement and don’t owe me a nickel (they don’t owe me a nickel anyway). I only ask for 90 days to do what I do and I expect to be successful.

5.    Communicate with Sellers while marketing: Try and call weekly or every other week. Just a 5 min call letting them know that you are working hard to find a buyer and you will establish a rapport that can serve you well during the negotiations. Ongoing communication with the sellers is vital to be successful in this business.

6.    Drivers Seat: I often tell sellers that they never lose when they are in the driver’s seat. They have the final say in the buyer we want to work with.  If they don’t like who we present, we simply will find another. And that’s absolutely true. But they almost always go with the buyer we bring. We strive for a win-win relationship in all our transactions.

7.    What does seller have to lose? Give us a shot! We are so confident that we will find a buyer that we will do it at our own expense. Why? We have a proven track record with our business model, so we know, given some time that we can sell their house; we are marketing to a totally different demographic than a realtor would, at no cost to them, never taking them out of the driver’s seat or being the ultimate decision maker, for 90 days. And, we don’t make a nickel until we find a buyer they approve. Why not give it a shot? What do you have to lose?

8.    4 Options Sellers have: I like to point out the options overleveraged sellers have when they are not being realistic about their situation:

a.    They can stay in the home (if they are still there) and pay on it forever

b.    Let it go to Foreclosure.

c.    Try and short sale it

d.    Find a “tenant” and become a landlord.

e.    Or work with us to find a buyer on a Lease Purchase that will be resp for all upkeep and repairs, and pay it off at some point in the future.

9.    Fee to seller—1st months payment: I make sure I tell every seller how I get paid in the first call whether they ask or not. We don’t work for free, and there is a cost for our knowledge and expertise and what we bring to the table. I tell every seller that we collect what we can get from the buyer and we ask you for the first month’s payment. Surprisingly, I have found that if I don’t ask for this, they seem less committed. “The buyer pays the day they move in; I will keep that payment and the seller’s first payment will begin in 30 days; after that It gets you an additional $1,500 every deal. 10 deals that’s an extra $15,000.00.

10.    If you are going to lose the deal over tenant damages concerns, you can concede a 1 month deposit: If the sellers are concerned that they have no security if the buyer defaults and “tears” up the house, you can offer them a non-refundable option deposit (not security – this doesn’t have to be paid back) equal to one month’s rent, the same amount they would collect if they were renting it. Obviously you try to keep the full deposit and 1st month’s payment, but if this is a hurdle the seller cannot overcome, this can be an option to present.

11.    Leave the door open to bring offers: Always negotiate the best deal you can. Cut your teeth the best you can. Period. But, you can’t make money on homes that you don’t control, so don’t split hairs unnecessarily. At times, I will agree to certain terms from the seller that are not the best, as long as the seller knows I may bring them an offer. The initial terms have to be marketable; however, I really just want the chance to take it to the market and see how it reacts.  7 out of 10 deals are revised once we find a buyer. As long as you leave the door open with the seller from the outset, there is nothing dishonest about negotiating a different offer after you have found a buyer.

12. If unsure of a possible Sandwich deal: You can generate more cash flow using a sandwich lease-purchase. A sandwich lease-purchase works like this: Assume an underlying mortgage payment is $1000/month but lease could be for $1500/month. You or the seller would net $500/month extra. This is called a “sandwich” Lease-purchase. If a deal has relatively low payments and some equity in the home, but you are not entirely sure if you want to stay in the deal or not, take it to market at higher terms, not committing to make a payment until you find a buyer, see what the market bears and what you can get from a buyer, and if you find a buyer with good terms, you can always reconstruct your agreement with the seller to more favorable terms. You can then Sandwich Lease Option at closing. The seller really doesn’t care either way, and frankly they would rather have you stay in the deal anyway. And if you don’t stay in the deal, but end up negotiating a higher price and better terms from the buyer, just keep the deposit and assign the better terms to the seller. That will just make them happier.

12.    Retail Price/Short-Term Lease Option: If I find the seller wants a retail price and I cannot negotiate that price, they might consider taking terms but don’t want anything long-term, I immediately go into the Retail Value in Today’s Market spiel. I tell them if they are willing to work with us for a short time, essentially providing short-term financing, enough time for a buyer that we find and they approve to get their long-term financing in place, I can usually get them a full retail price or close to it in today’s market, and with no fees or commissions to them. I do stress that the house will have to appraise at some point, that the final step in a Lease Purchase is for the buyer to go to the bank and get a traditional bank loan, and that the bank will only lend on appraised value. If their price is out of line and there could be a value issue down the road, we need to address it now. I let them know that most terms buyers don’t negotiate the price. The seller will cash flow along the way, and have no maintenance/upkeep responsibilities (no landlording). They would simply be acting as a bank to a buyer they will ultimately approve, and we will gear our qualifying toward working with a buyer who is not far from financing today (no recent BK’s or FC’s).  It does make your job a little harder finding a more qualified buyer, but those folks are out there, and if you find a buyer who has enough of the right stuff, the seller may even loosen up their terms. Again, I’d rather have a shot at putting a deal together than no deal at all. Careful here not to waste time with “pie in the sky” sellers. There is a fine line, but unless the terms are clearly unmarketable, you have nothing to lose in trying. Have your VA post a few ads, put some signs out, and see what the market says. Once you have the relationship with the seller developed, and they see someone is actively trying to sell their home, they are sometimes more inclined to work with more favorable terms if the market doesn’t respond to their pie in the sky ones.

13.    If it’s a smoking cash deal, you will always find the money: Just trust me on this, if you run across a deal that is smoking hot, but seller needs cashed out, put it under contract, get 30-45 days to close (commit to them you will try to close sooner but need to make sure title is clean and in some cases using IRA funds to pay for it, and that can take a few weeks), and go find the money to buy it. 30-45 days will give you time to go find an investor to fund it, or you can always wholesale it for a lesser amount to a cash buyer. If you negotiate a good enough deal, you will almost always find a way to make money from it. Worst case you lose $10 and a little face.

14.    Higher Monthly Debt Service than the Market Rent: You can always agree to take the higher payment to market and see what it bears before asking the seller to contribute the difference. Sometimes terms buyers are willing to pay more for the opportunity to buy. This is true. But if you send 10 buyers through and all 10 complain about the payment, that seller must know from the outset you may come back to them with a lower payment offer. Sometimes their desire to alleviate the monthly debt service is so strong they might be willing contribute the difference on a monthly basis. A few hundred dollars is much better than making the entire payment every month. Don’t waste too much time here. 2-3 weeks max. If no interest by then, go back to seller asking them to supplement a lower payment. If a buyer likes the place but not the payment, find out the most they can pay along with the rest of their credentials, and you can always present that to the seller as well.

15.    Tailor the Terms and Conditions around the buyers ability to finance: What I ask from every seller is flexibility with the terms, in particular with the term of the lease purchase. If the buyer has decent credit and can get it cleaned up and mortgage ready within 12 months, we will typically offer them only a 12 month lease purchase term, with our standard 6 month extension (under certain conditions) if they cannot qualify for whatever reason within the 12 months. We don’t just arbitrarily offer some term to the buyer. We find out how much time they think they will need, and what our credit people tell us they will need, then put together the terms and conditions.

a.    This is a “Stepping Stone to Homeownership”: Just enough time to get your buyers mortgage ready.

b.    Most Sellers want their cash sooner than later: So by offering to structure shorter terms (in some cases) with your buyer based on their ability to finance is appealing to many sellers.

c.     Think With the End in Mind: Ultimate objective is to find a buyer who will qualify for a traditional mortgage within the timeframe that we give them. This goes for both buyers and sellers.

d.    You don’t change how you market, you just change how you qualify: If your seller is looking for a short term, your marketing does not change a bit. But you know that any buyers calling on this home have to have somewhat decent credit and not be too far out from qualifying for a traditional mortgage today. Any foreclosures, short sales, or bankruptcies require a 3 year seasoning period before they can qualify again (general rule of thumb), so those buyers are out. If they think they have decent credit or are not sure, send them to your mortgage lender or credit guy to see where they stand. They will tell you if they can qualify in the timeframe you are working with.

e.    Due Diligence: Qualifying just like a traditional borrower with the understanding that they will likely not qualify today. What we really are looking for are the “why”, and the “when.” Why can’t they finance today, how long until they should be able to, and what steps need to be taken to get there? Good information to share with sellers on your initial call.

The above items are simply an outline and checklist that we go through when involved in a lease-purchase transaction. By following these parameters and working with our team, you can have your own $10,000 a month business in your local area.