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Go To: Home > Tips & Strategies > Tip 8

Invest and make more money with fewer headaches using leverage to control homes, not own them

by Jeff Beaubien

Every serious real estate investor knows about leverage (the use of borrowed funds to improve ones' capacity AND to increase the rate of return on an investment). And every real estate investor knows that tenants are, more times than not, a headache.

"...most real estate investors don't know..."

But most real estate investors don't know that if you control a home -- rather than own it -- you can make even bigger profits at lightning speed, with almost no money out of pocket, and NO headaches.

What do I mean when I say "control homes?"

What I mean is this...

You have total and complete control over every single aspect of the home, but your name is not on the deed. You can live in the home, you can make improvements to the home and you can even sell the home -- you CONTROL everything about it.

How is this possible?

Simple...

A lease contract puts you in immediate control of a home as far as occupancy is concerned. When you throw an option to purchase contract into the mix, you now have an exclusive right to buy the home at a later specified time for a specific amount of money. The home essentially belongs to you unless you decide not to buy it. By definition, this is a Lease 2 Purchase contract.

"...leverage and control without ownership..."

Now let's talk about the actual nuts and bolts, remembering the concepts of leverage and control without ownership...

Say you find Sally the Seller and negotiate the control of her home with a Lease 2 Purchase contract. Let's say that Sally agrees to Lease 2 Purchase her home to you on the following terms (assume that you got a pretty good deal and there is a little room for mark-up):

Downpayment: $1,700 (first months rent plust $1,000 option deposit)
Rent: $700 per month
Rent credit: $250 per month
Term: 1 year
Sales price: $75,000

Since you know the value and appeal of the Lease 2 Purchase contract to buyers, you raise your sales price and monthly payment accordingly.

You place an ad in your local newspaper which reads...

"Rent-to-Own. No Qualifying! $3,800 down, $800 per month."

Bob the Buyer -- who can't qualify for a mortgage for one reason or another -- calls you and inquires about your terms, which are...

Downpayment: $3,800 (first months rent plust $3,000 option deposit)
Rent: $800 per month
Rent credit: $100 per month
Term: 1 year
Sales price: $89,000

Bob likes your terms so you run him through your own custom pre-qualification process. He is perfect so you close the deal and collect your cash.

How much did you make?

According to my profit calculators, you will make exactly $2,100 up-front, $1,100 in monthly rental payments, and $13,800 in back end net profit for a total net profit of $17,000 in just twelve months. Imagine doing just one of these deals per month!

Let's take a step back for a moment, take a deep breath, and see what you've accomplished.

You've gone out and controlled a home for a short period of time with minimum cash out of pocket. Check. You did your homework and got a good deal on the home. Check. You sub-leased your Lease 2 Purchase agreement with Sally the Seller to Bob the Buyer for a $17,000 profit. Check.

"...I've got good news for you..."

Your only risk through the entire deal was that it might take you a week or two to find a quality tenant/buyer. Well, I've got good news for you... When someone sees an advertisement for a Lease 2 Purchase deal in the newspaper, they are on it like white on rice. Why? Because you're offering financing terms that no bank or lender in the world can touch with a ten foot pole!

What about tenant headaches? Forget 'em! Click here to read my report, "Put your rentals on automatic pilot and get the best tenants available."

I do two to five of these deals each and every month because they are so quick, easy and profitable!

But I've saved the best for last.

If you choose, you can assign (sell) your option to a third party, maybe another real estate investor. Heck, it's still worth $14,900 in one year. You could pocket your up-front profit of $2,100 and sell your option for at least a couple thousand dollars -- probably more.

Now that's a great way to make some money in a hurry!

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