Real Estate Geek

If you’ve heard the term “lease option to purchase” thrown around when talking to other real estate investors, agents, etc. and not sure what the term actually means, then you’ve hit the right page. You’ve done the right thing by searching the web or following this blog in order to gain the insight required to do some of these creative financing deals. Now, unlike some other sites out there on the web that are just trying to sell you a form or cram some bologna down your throat, I actually have done a lease option to purchase agreement. So when I give you the definition of this, you can rely on what I’m saying. So here it is:

“A lease option to purchase is a contract that provides the buyer with a standard lease agreement for specified period of time, coupled with an option payment, and a fixed price that enables them to buy the property at the end of the lease agreement.”

The Mechanics of the Lease Option

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Another invaluable resource for the investor or home seeker is the use of the local MLS. But if you aren’t a realtor, how do you find and obtain access to the system? The way the MLS is structured generally works like this: if a town is small, the MLS might be tied between it and the neighboring small town(s). A large city will likely have its own MLS.

Searching for the MLS Engine

So the place to start would be going to your favorite search engine (like google, yahoo or msn) and typing in your town/city, state and the words “MLS”. Now, don’t be surprised when you see a realtor’s website at the top of the list. Often, direct access to the main MLS system itself is restricted. However, smart realtors will include the IDX or sharing version of the MLS to the public.

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If you don’t already know it, your local newspaper creates a substantial part of their income by selling ads in the classified section of its publication. And these advertisements have reached a new level in many local markets - the Internet. With the boom of the Internet and its use, more and more local newspapers have added a website to their advertising arsenal, which transcends into a tremendous benefit for you, both as a marketer and a searcher of properties that you can buy as investments. But how to find them? And does it require a subscription to the newspaper?

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If you have done any real estate investing, you understand how difficult it can be to find motivated sellers. So being able to find distressed properties like VA foreclosures can really help you get started. The Veterans Administration list properties with a website online that anyone can access, not just a realtor. Not to mention, this site also lists bank owned properties as well. It is an excellent resource for acquiring leads on distressed properties in you area. Are you ready for this resource?…

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There are a lot of guru investor types that will tell you that investing in mobile homes is a bad idea. They will tell you that because of the nature of mobile homes, and how their values decline over time, that they are not good investments, and that you should stick to regular on-site built homes. Now I’ll agree with the guru supposition that mobile home value decrease with time, however, if your approach to real estate investing is one of long term asset building, then mobile homes are a great choice.

Mobile Home Acquisition and Rental Compared to On-site Built Homes

Let’s take an example of two investments that I currently hold. These two properties are located approximately 12 miles from each other; one is a mobile home of about 1150 square feet, and one is an on-site built home of about 1150 square feet. Each home brings in $650 per month of rent currently; the on-site built home has a total PITI of about $400, while the mobile home has a total PITI of about $350. You might say the difference isn’t much, but the mobile home is financed for 10 years, while the on-site built home is on a 30 year note.

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If you have been in the real esate game very long, you certainly understand the value of knowing the property tax appraisal value on any deal you are considering. And for those of you who know how to retrieve that information online, more power to you. But if you don’t know how to find that information online, I have a great free tool you can use to easily find that information.

The Old School Tax Appraisal Hassle

Here’s the typical situation. Almost all the property taxing authorities are consolodated at the county level. So whever your county’s clerk is located, that is where you will be able to get the tax roll information. So the old method was to contact your county clerk, ask them where they were located, and then drive over or ask them directly about a property’s deed history, assessed value, taxes, etc. I think it is important to note here that the property’s tax value is referred to as an “assessed value” as opposed to a real estate appraiser’s “appraised value”. These two values can, and very often are different.

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Why is it so important for home owners in expensive areas and real estate investors to get a real estate license? It starts where most everything else starts - cost. Realtors are extremely expensive. Now on occasion the high cost of doing business with a realtor is worth it, but most of the realtors out there probably only know slightly more than a typical homeowner, and that is primarily due to the fact that there are state and local mandates for real estate education among realtors. The issue of having a sea of sub par realtors out there has always been a pet-peeve of mine. It seems wrong to me that a homeowner cannot gain access to their local MLS without consulting with a realtor. But on the other hand, business is business and we live in a ‘free’ market, not an ‘open’ market. So let me give you a few things here about the importance I place on getting a real estate license:

Cost of Doing Business Without a License

This is especially true for investors and homeowners that live in expensive areas. They typical realtor fee for selling a home is around 6%. Many realtors will not back off from getting their 6%, so a million dollar home will cost you $60,000 to sell. That is quite a bit of change that you could be putting back into your own pocket.

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