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Therefore it is to your advantage to offer your Optionee incentives to be early.  Perhaps instead of the usual $100 per month credit toward the payoff of the Option Price, give them an extra $50 if they pay before the 1^st of the month.  What does that cost you when it’s all said and done – $600 a year?  That’s nothing compared to the payday you will receive when they exercise the option if you done your numbers correctly, and it ensures that you won’t lose out because they were thirty days late once in the past twelve months!

For properties that turn Average Joes into Real Estate Investing Pros, be sure to visit http://www.wholesalepropertypro.com.

In the last post, we suggested that you have your lease option tenant meet with a financial expert to make sure that the tenant can exercise the lease option in the future. Here is an example of why this is so critical.

Let’s say that you have a Lease Option Tenant named Sue and Joe.  They had some problems a few years ago when Joe had a heart attack. He needed emergency surgery and he was out of work for two years.  Sue had to go to part time work to care for Joe and they ended up losing their home to foreclosure. They defaulted on all of their credit cards, and then had to file bankruptcy.  (Tear jerker isn’t it?)

But now it’s been two years since the bankruptcy. Joe had multi-bypass surgery and is back working a better job than he had before. Susan is working full time and they have re-established credit since the bankruptcy was discharged one year ago.

They have five thousand dollars to put down and their current credit rating is a 620. The Lease Payment of $1400.00 a month is five hundred dollars less than what they were paying for their mortgage, and is $400 more per month than most rentals are going for in the area, which means better cash flow for you  Sounds like they would be the perfect couple to lease option in the next 24 months, don’t they?

But what you don’t know is if you really do want them to exercise the option in twenty four months they have no chance at all at getting financed.  Why?  Because it will only have been three years from the discharge of the bankruptcy, and you they not only had a bankruptcy but they also had the foreclosure. These are considered to be two “lifetime events” in the lending world, which means that they cannot get financed for at least seven years.

So even though Sue and Joe may be great possibilities, they are not the ones to place in the property unless you are going to be willing to wait until it is seven years after their bankruptcy. This means you will need to readjust the terms of the Lease Option if they are going to be in the home.

You might even have to move them to another property that you are willing to have a long term tenant so that way you don’t lose the opportunity. There is a slim chance you could get them done FHA, but not enough of chance that it would be worth the risk.

As you can see, it’s vitally important that you have your lease option tenants go through this process so you can be sure that the lease option can be exercised in the future.

For properties that turn Average Joes into Real Estate Investing Pros, be sure to visit http://www.wholesalepropertypro.com.

This is going to cost you an average of $200 to $300 for the service. It is critical that you do it! What we have most of our investors do is make this fee part of the Non Refundable Lease Option Fee, and pass it on to the tenant.

DON’T SKIP THIS STEP! Don’t get cheap at this point in the process. View this on the same level as getting a property inspection before you purchase a home. Sure you may get away with not having one, but the vast majority of times, it ends up costing you more money in the long run than if you had just spent the money for the inspection in the first place.

For properties that turn Average Joes into Real Estate Investing Pros, be sure to visit http://www.wholesalepropertypro.com.

Who wants to hear that your credit matters? NO ONE!  So the Gurus came up with the slogan “Credit doesn’t matter” in order to sell their products. And guess what? It worked!

Real Estate Gurus have sold billions of dollars of products by getting people to buy into that line of reasoning because they can produce a small number of cases where someone didn’t need an credit score in order to get a deal done.

Well guess what? It’s a new ballgame. The 70s, 80s, 90s and roaring years of the early 2000s are gone. We are now in the recession of 2008-2011 and credit is important.

That being said, what if your credit stinks? Does this take you out of the running? Not necessarily.  With the right education and guidance you can overcome this problem. We’ve taken people from the depths of the credit cellar to the top of the rung in a short period of time.

For properties that turn Average Joes into Real Estate Investing Pros, be sure to visit http://www.wholesalepropertypro.com.

Now there are a bunch of inexperienced appraisers, or even worse not even fully licensed appraisers, left in the pool of appraisers. Not only are these appraisers low  on experience but most have been coached by the banks to bring in the appraisal at a far lower value than normal. This is done in order to protect the banks…which doesn’t help you!

It’s like going to the hospital and finding out that the only people there are first year residents! Technically, a resident is a doctor, but are they the one you want working on you at two in the morning when you have severe chest paints?  I don’t think so.  The banks, of course, deny they are coaching the appraisers to bring the values in low – but the proof is in the pudding! HVCC has definitely changed things…for the worse!

For properties that turn Average Joes into Real Estate Investing Pros, be sure to visit http://www.wholesalepropertypro.com.

The number one thing that is destroying mortgages in America today is the Home Valuation Code of Conduct (HVCC)! Why should you care?  Because bottom line it will cost you tens of thousands of dollars! You need the “know the enemy” so to speak – and here’s a bit of background on the HVCC.

The HVCC was the brainchild of an Attorney General in New York, who discovered that there was fraud in the mortgage business.  The investigation showed that there were a small number of people in the industry who were forming rings that went out and stole money from banks and mortgage lenders.

This group of people would get an appraiser, a title company, a mortgage broker, and “straw buyer” together. Then, using an appraisal that was grossly inflated, they’d get cash out of properties that were worth far less that that. In some rare instances – the properties didn’t even exist! This ended up costing the lenders millions of dollars!

The HVCC decided that there shouldn’t be any contact between the loan officer and the appraiser so that the appraisal couldn’t be inflated. On the surface, it seemed like a great idea.  But in reality, it was one of the dumbest moves anyone has ever made in the history of mortgage lending!

How so? Well…for starters it ignored all of the other factors that went into the fraudulent activity. There weren’t just two people involved in these schemes – there were several! They all had to work together in order to commit fraud. Also…the actual fraud being committed was much under the inflated numbers that were portrayed in the media. It was overhyped – which led to drastic action that is currently hurting mortgages!

For properties that turn Average Joes into Real Estate Investing Pros, be sure to visit http://www.wholesalepropertypro.com.

Let the Optionee know that since in the end they will exercise the option, and get financed, you want to help ensure that they are not just throwing their hard earned money away. The best way to do that is to work on their credit report.  Show them the added benefits once they exercise the lease option.

Usually if you’ve priced it right then their new payment after the option is exercised will be lower than the lease price they will be paying you.  That gives them something to shoot for, because who doesn’t want to save money?!  Once they are enrolled in a credit repair program, follow up with them from time to time to make sure they are following the program and improving their credit.

Have them meet with your finance person or mortgage broker who will be able to guide them along with tips on how to improve their scores and what to do in order to lower outstanding debts.  If you don’t have someone you can refer them to then please send us an email to questions@thewayneturnergroup.com and we’ll help you out.

For properties that turn Average Joes into Real Estate Investing Pros, be sure to visit http://www.wholesalepropertypro.com.

Since lenders are always looking for anything fishy, eliminate the possibility by having a licensed (if your state requires it) and registered management company. The management company should have a real telephone (hard line, not just a cell phone) and office with a white or yellow page listing.

If you for some reason don’t want to spend the money to have a management company collect your payment for you, just send us an e-mail and we’ll walk you through how to get around this yourself. (questions@thewayneturnergroup.com). We also suggest not using any management company that doesn’t have at least fifty properties that they currently manage! In this case, the more experience the better.

For properties that turn Average Joes into Real Estate Investing Pros, be sure to visit http://www.wholesalepropertypro.com.

Now the requirement is kind of redundant as they are already requiring that you have twelve months canceled checks showing payments, and also the Lease Option recorded at least twelve months.

It’s just another hoop that you need to be aware of that you’ll have to jump through. Lenders are just trying to cover themselves. By putting a crazy stipulation such as this on Lease Options, they figure it prevents them from having to buy back a loan on Wall Street, and it makes them look like they were making sure the tenant was really living in the property.  The best way to handle it is just to prepare for it. Advise your lease option tenant to hold onto their utility bills that contains the address of the property.

For properties that turn Average Joes into Real Estate Investing Pros, be sure to visit http://www.wholesalepropertypro.com.