LEASE OPTIONS: LITTLE OR NO MONEY DOWN TECHNIQUES WENDY PATTON
increments by $10,000 each time. All of the hands
Whenever you can negotiate the terms on real
slowly but surely drop. At the price of $180,000
estate the value of the property goes up. Deals
almost all hands are down. At $190,000, usually, all
that were out of your reach before now might be
hands in the room are down. The point I am trying
possible – i.e. large apartment complexes. Now
to make to each of them is most investors are not
you are able to pay a higher price on a home if
willing to pay this close to retail price for a home
you can get reasonable terms, and having this
(nor should they in most cases). I then re-pose the
tool at your disposal will allow you to open up
question to each of them, “How many of you would
many new possibilities and make money on deals
be willing to pay $200,000 for that same home 10
that were before completely ruled out. I am not
years from now in a market that is appreciating at
suggesting that you pay $200,000 for a home
10% per year with nothing down and only $1000
worth $200,000, especially in many markets
per month?” Now all their hands go back up. I ask,
today, but you can if certain market conditions
“Why, now are you willing to pay more for that
and terms previously described exist. If your
house that you refused to pay $180,000 - $190,000
market is flat (not appreciating) and you have only
for a few minutes ago?” They respond in unison
2 years to exercise your option to buy the home,
saying, “Because you added some attractive
then maybe the price you offer should be much
terms!” My response is always the same, “You
less. It’s all about terms!
didn’t ask the terms before!” Most investors never
ask the seller for any terms. They only consider one
term - Price! They walk away from deals before
they know if terms are even possible.
“Terms” are parts of an entire deal, such as price,
length of time to pay, monthly payment, amount
applied to the purchase price and other negotiated
items with the seller. Most of the time even
experienced real estate investors don’t ask, “When
does the seller need their price?” They say no to an
entire deal before they ask the seller when the
seller needs their price. The previous example
illustrates how most investors think, they don’t ask
all of the right questions about the property before
When doing any lease option deal it is one of my
they make a decision. They look at the surface but
mottos that everyone must win or don’t do the
they don’t dig deeper for other possibilities. Lease
deal. There are 3 people involved in a Sandwich
options provide a creative solution that can allow
Lease Option: the seller, you (the investor) and the
you to negotiate terms that can increase your profits
tenant/buyer. It must be a win/win/win, otherwise
and provide a great investment opportunity.
walk away.