Finding Lesse/Buyers
I am just about to embark on what I hope to be the first of many lease option transactions. I will be buying a property and then lease optioning. My biggest concern is getting lessee/buyers. Are there really people out there who can’t or don’t want to go through a lender, yet have $3K – 4K to pay up front, and can pay a slightly higher than market rent?
I am rather worried about this. Do you have to go through several prospects to find someone who qualifies? Any input on this is greatly appreciated! Does anyone do credit checks? Or do you just accept their funds?
Thank you all!
Paula S.
Paul,
You would be wise to run a continuous ad in a local paper with something like "no bank qualifying rent-to-own - low down payment" and see how many leads you get. There are people out there who rent-to-own for a variety of reasons, and believe it or not, there are STILL people out there who think they can't qualify for a mortgage when they in fact can, even though the rate is higher.
There is a company out tehre called Tenant Stream that will give you leads for rent-to-own tenants. You can find them on the web. Also - if you do a web search for "landlord credit checks" there are MANY companies that have programs for this sort of thing. Good luck!
tmpringle301,
Thanks for the info. It's Paula, by the way. Last I checked I was still of the femine persuasion.
I have heard of Tenant Stream and will look into that. I was hoping to avoid running the ad (ie. spend the cash) until I got a house under contract, but maybe I should work it the other way around and run an ad first.
Thanks!
PaulA
Hi Paula, so far my waiting list has stayed longer than I can fill, I do have tenants fill out a rental application, if they can't come up with 3 personal references, employment history for 2 years, and landlord contact info for last 2 years, then I run a credit check (with their signed release and non-refundable $25 fee of course).
Have Fun!
Ted
Ted,
Thanks! That helps a lot. And makes me feel better. It looks like I am going to run ads first and accumulate a list. That sounds like the smartest thing to do. Then I will have L/Bs ready to go when I buy. Why didn't I think of that before?
Paula
Trend carefully with the "run the ad first," idea. It has problems of it's on.
First and foremost, it can be construed as advertising fraud. Why? A) because you don't currently have a property to rent (and never did) and B) you aren't currently in the rental business to back up your claim. However small this threat is, or seems to be, it is there.
Second, tenant/buyers have a timeline as well. They are not going to wait around for you to find them a home to rent. If someone calls you wanting to L/O, in most cases, you have a maximum of 3 weeks to find them a home. Most new investors can't locate a deal that fast, much less get one found AND closed AND fixed up ready for move-in.
Third, it creates a motivated buyer, YOU. If you run an ad, and get flooded with phone calls with people wanting this and that type of property, you begin to actively search for those properties. If you find one, you think "I have a buyer for this, I've got to get it," and will usually pay too much. If the L/O buyer comes thru, then it might work out, but what usually happens is that the tenant/buyer is not as good as the sounded over the phone or they have already found something else. IF they have already moved, then you are left with a vacant, overpriced property trying to find another tenant. If they don't check out up to par, then you have to decide if you want to risk it with them or be left with a vacant property. Not good choices.
Trust me. If the deal is good, and the L/O terms are fair, then you won't have a problem getting someone in the home. Downpayment , Monthly, L/O terms, option price, and location are what sell the deal, fairly much in that order.
Roger
Roger,
Thank you for your input. I see what you are saying and will take that into consideration.
I think more questions to this forum are in order.
Paula