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Lease Option Success Story - 5 Deals in One Year

by Tony Cooper   

I already owned eight properties with a partner when I decided that I would like to venture on my own in December 2001. I was finishing my finance degree, working as a server at a Longhorn's Steak House, and in my first year of marriage. I was not pursuing real estate investing because I just didn't feel I could make any money, since I would be moving in four months.

I started looking for houses in the town where I lived figuring that I might find something I could make a deal on. After getting tired of driving around all of the time, I put an ad in the news paper.

I Buy Houses--Call Tony XXX-XXXX


That is it. It cost me about $400 to run the add for four months on Sundays only. I started getting calls. It seems funny because when I first started doing it, I was thinking about how much it cost me; I even thought it was a big step.

The first call that turned out to make me money was from another investor. He had a pre-foreclosure that he could arrange on a "subject to" basis. I had never done one before he helped me, and I paid him a finders fee.

The house needed some work; I thought $5k maximum, but it turned out to be $9k. I had to pay $7k to bring the mortgage current and started making the payments. I have a home equity line of credit that allowed me to come up with all of the cash needed for the project.

When the project was over I had approximately $55k in the house (my money plus the first mortgage subject to). I sold it on a lease option for $70k. The fix up and sale took about 45 days. I then had to go to the bank and refinance to get my money back out of the house.

I later found out that selling on a lease option on this type of deal was not the best thing I could have done. We live and learn. After working with a mortgage broker and two local banks I have found someone who will give me 80% LTV. This will get me back $56k minus the cost of the loan.

The tenant is paying me $1,000 per month $700 for rent and $300 for the $3k I wanted up front. I financed it over ten months for him and took a car title for security. As I am writing this, he has made every $1,000 dollar payment on time. (It has been about one year.)

After that deal, a woman called me on the ad. She wanted to sell me a house that was infested with termites. I felt it was a little too big of a project for me, so I brought another investor in. I earned a $2,250 finders fee. I did not even put a contract on it. I had less than two hours of my time in it.

After that I passed out 2000 flyers and ended up buying a house on lease option. My payments are $516, his PITI payment. I paid $1 for the three-year option to buy at his payoff, (about $64,000) and my first payment was at the beginning of the next month.

I had it lease optioned two weeks after my first payment with $1,500 down and $675 per month, a one-year option price of $69,500, and he gets no rent credits. As of today, about seven months later, he has made every payment on time. I probably could have gotten a higher price, but I got a little scared and wanted to make sure the deal went through. Almost identical houses there are selling for $70,000.

Later in the year I found a duplex owned by an out-of-town owner and put a contract on it for $42.5k. I sold the contract for $5k with less than a few hours work on that deal. That duplex now rents for $725 per month total.

In the beginning of 2003, after making several offers to buy a bank REO, my offer was accepted for $30k. I also sold that contract for $5k, ARV $50k and rents for $525.

Well that is what has happened in about 12 months since I started getting serious about my part-time real estate investing. I still have not really poured the coal on yet. Good luck and happy investing.

 
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