I called on an ad in the “for rent” section and believed to have a motivated seller on the other end. I went to see the house, which was located in a nice area. The home was a three-bedroom/one-bathroom that need some updating. The owner had another home and was paying two mortgages because this home used to be his grandmother’s, but she was moving in with one of her sons.
He had been making the payments for six months for her, but couldn’t afford to do it anymore. I told the owner that I would have an offer in front of him the next day. In the meantime, I checked the comps and the house came back in the mid $80,000 range.
I wrote up a lease option offer for three years, $700 month ($100 to $150 under market rent), and a purchase price of $72,000. He accepted the offer, so I gave him his $1 option consideration and had a month and a half before my first month’s rent was due!
I knew that this was my first real estate deal, and I was going to have to learn as I went. So I ran a “rent to own” ad and found someone very interested. He loved the place, but didn’t show up the day we were supposed to sign the contract and collect the money. (Wasted a whole week of my time.)
So again, another ad and another buyer. This young lady loved the place and had the money, but had legal problems getting her hands on the money due to a divorce. (Another week went by.)
Another ad and more interested people. Another time waster was the third prospect. By now I had a list of over forty people interested, and I knew that someone on that list would show up and not waste my time.
Finally, I got a call from a pastor at a local church. I showed him the house, and he loved it. We agreed to $2,500 option consideration and $800 rent. A few days later we signed the paperwork, gave keys, and collected checks ($2,500 and first month’s rent).
The whole process took approximately forty-five days. I know that I made some mistakes along the way, but I learned a lot and am ready to do it again. Overall, I learned a lot, and I made money too!
$2,500 up front
$100 per month cash flow
$5,400 when/if the option is exercised in a note or cash.