Lease Purchase Success

by Dave Fitzpatrick
Columbus, OH

I set up all of my single family home rentals on a lease option to purchase basis. Columbus, Ohio is a great market, so typically, a three-day ad is all I need to rent a place. I'll receive an average of 35 to 40 calls per day while the ad is running. I make it a point to call back each and every person responding to an ad, EVEN IF I'VE ALREADY RENTED THE ADVERTISED HOME.

When I call these folks back, I let them know the place they're calling about has been rented, then proceed to screen them on what they're looking for and try and figure what they can afford. I might ask the following: How many bedrooms? What side of town? What monthly payment can you comfortably afford? When are you looking to move?

I'll then proceed to tell these prospective renters how lease options work--all of the advantages to the buyer/renter. Working with local Realtors® (who understand real estate investing and buying with little or no money down), I then research homes that I can pick up for little or no money down, that will:

• Generate a positive cash flow of at least $100/month





• I can flip to the renter for a $10,000+ profit





• Put the renter in the home under normal appraised values in the particular neighborhood

It's a win-win situation for everybody. I average about one of these per month. Here's last month's actual closing:

I had an interested party looking for a three-bedroom home and wanted their rent to be no higher than $650 per month. Using a local HUD list, I located a potential home where the numbers looked like they could work. It was a three-bedroom Cape Cod, two baths, one-car attached garage located in a neighborhood where homes appraised in the $75,000-$80,000 range.

HUD was asking $56,000 for the home. I had the prospective tenants drive by the place and let me know what they thought. They loved it. I put a bid in sight unseen at $47,000, and it was accepted. (I really don't recommend purchasing a place unseen, but I knew rehab work probably wouldn't total more than $10,000).

Turned out the home just needed painting, new carpeting, and some plumbing work--that's it. I was able to secure an investor loan of $60,000 (80% of the appraised after fix-up value of $75,000), so no money down and actually, money in my pocket. I set up a twelve-month lease option with the tenants, purchase price to be $71,000. Their deposit was $1,200.

They agreed to paint the home to forego the first month rent which was set at $635. (My first mortgage payment wasn't due yet). I paid for new carpet which was $1,600 and the plumbing work at just over $300. I've got a great cash flow, they're happy as larks, and so am I! Win-win for everyone.

There are A LOT of these people out there, and it's not difficult to find them. Everyone wins!