Two more reason that there is a market for people who will gladly and cheerfully pay you an big, fat non-refundable Option fee and lease option your house in Michigan:
1. They are not sure if themselves or their family will like the house or the school district or even like living in the house. So why are they not getting an apartment?
Well it is just hard to get an apartment with 2 kids, 1 dog and “stuff”. Most apartments are not build for families but rather couples with minimum belongings.
Believe me I lived in apartments for 6 years when I came to America. There is not too much space to put things out. They do have the option of renting a house but may be they want to live in a particular area and they can’t find a house they like.
2. Michigan area being the hub of automotive industry – lots and lots of people move in and out of Michigan every year. They get transferred for a projects, get hired by a consulting firm that might ship you to a different Michigan city for a year or three and so on.
Lots of these people don’t want to take a risk of buying a house in a city that they are not going to stay in forever. But if they have families and pets and stuff – they do have a housing requirement that most likely will not be fulfilled by an apartment.
3. Couples who are together but not sure if they want to buy a house together.
Why do you need to know the reasons on why people would do lease-options? Because that will help you understand where can you go and find them and more importantly where can you run advertisements to attract them.
How big is the lease-option market?
You just have to pick up your metro area newspaper in Michigan and check out the Rent to Own section to realize lots of lots of houses get sold that way.
If you have access to MLS then you can also run a Quick Search and see how many houses pull up on the first page where the owners are open to the idea of a lease option. .
And then off course you have the entire I Buy Houses For Cash crowd from several real estate gurus who teach “sandwich leases”. More on that later.
There are big name companies in the city of Detroit for an example who have built multi million dollar junker to lease option businesses by buying 2-3 bedroom junkers, fixing them, and lease optioning them to prospective homeowners for 12 / 18 months, get a payment history on record and then flipping the house over. They sell anywhere from 75 – 100 houses like this every year.
One of the big things everybody needs to really get about lease-options is that the differece between renting your house and selling it to a tenant-buyer.
It is the mindset.
Tenants have no stake in the house they are living in, apart from the measly security deposits they gave up front. Cabinets squeaking – they call the landlord. A tree has long branches scrapping the windows – they call the landlord. Kid threw a roll of toilet paper in the toilet and jammed it – they call the landlord.
And off course you will never see a tenant do home improvements in the house they live in. And why should they? They are just renting it!
The lease option buyer is a much more attractive alternative. Off course you want to sell your properties as fast as you can but sometime the capital gain is hefty and you want to wait at least 12 months to sell so you can save on the capital gains tax. Sometime you are having a hard time selling a house and you do want to cash out the hard money or private money lender out of your life.
Things happen and if the push comes to it and you have to make a decision between choosing a renter vs. a tenant-buyer; I am definitely prejudiced toward the later.
I have noticed a different mindset in the lease option buyers that I have done in the recent years. One they have a significant investment in the property in the shape of upfront Option payment – the lowest one I have seen is $3,500; the highest one I have seen is $11,500. That is by the way – non-refundable; meaning whether they choose to live there or not – at the end of the lease; that money is yours to keep.
And that changes a lot in the minds of the new tenant-buyer – they don’t call you when the grass is long and the branches of a tree scrap the windows at night – they cut the grass and chop off the branch. If the toilet clogs, they will go the Meijer and buy Liquid Plumber and pour it in before they call you. If the cabinets in the kitchen are squeaking – they will go buy a bottle of oil and pour it in to stop it.
It is the mindset that is very different that makes the lease-option mucho more attractive. Other than the money off course.
Next: How to get the maximum option payment and monthly lease.
