What is “Wholesaling Lease Options”?
by Joe McCall
Let me first tell you a little bit about my background. A few years ago, I was buying as many homes as I could with traditional financing. But when the banks started telling me that I couldn’t buy any more homes, I started buying homes creatively – thru “subject-to” and “sandwich lease options” methods. In the course of 18 months, I bought over 16 homes!
Yes, I owned 16 homes!!! I thought I had it made. I was making $100 – $200 net cash flow on each house. My passive income was growing, and I was steadily getting out of the rat race. I was a “Successful Real Estate Investor” now – or so I thought!
But guess what? I quickly discovered that while I might have been Equity Rich… I was seriously Cash Poor. I had lots of equity, but no cash to pay the bills!
(How many of you know – you can’t eat “equities”?)
But let’s look at my situation a little deeper… All that equity I thought I had in those 16 homes… was a HYPOTHETICAL MYTH. All the “equity” I thought I had quickly vanished when the market started crashing. All of the sudden, I was equity poor AND cash poor. I was so over-extended and over-leveraged. I was buried in debt, and most of my private lenders started asking for their money back.
I started getting behind – on everything. I had a serious cash flow problem. I had to figure something out… and fast.
That’s when I decided to go back to the basics and learn the most fundamental part of the business – wholesaling houses. Things then actually started turning around for me. I started to flip some properties and began digging myself out of all the debt I was in.
But I was also spending thousands and thousands of dollars a month on marketing – direct mail, social media, websites, signs, etc., etc. I was getting a lot of leads and making a lot of money wholesaling houses, but I was starting to get very frustrated again with the business.
I started asking myself, “Why on earth do I have to spend so much money for stupid leads that I can’t do anything with but throw away? Why were 90% of my leads from sellers who had ZERO motivation, who weren’t behind on payments, or who didn’t have any equity? Or maybe they did have some equity, but they sure weren’t willing to share any of it with me!
So, at this point in my business, I knew what I loved and what I hated. I loved the profits that Wholesaling was giving me, but I hated the money I was wasting on marketing. I also loved the fact that Lease Options allowed me to control a property without owning it. But I hated tenants, trash, and termites. I loved making quick nickels vs. slow dimes. But I hated taking on more debt – more obligations.
I wanted to keep the good in Wholesaling and Lease Options but take out the bad.
That’s when it hit me…
Why can’t I Wholesale “Lease Options”?!
That simple question literally changed my life forever.
Why can’t I Wholesale “Lease Options”?!
Let’s look at some facts…
- There are TONS of sellers out there who can’t sell their homes.
- There are TONS of buyers out there who can’t buy a home.
- Creative Investors have the solutions these people need!
Most Sellers can’t discount their home to 70 cents on the dollar to compete with all the distressed houses in their neighborhood. And most Buyers can’t get a loan because the banks won’t lend them any money! It’s a vicious, downward spiral.
So again, I asked myself, why am I throwing away all these leads? Why can’t I do anything with them?
Why can’t I plug “Lease Options” and “Wholesaling” together, and start making money with these two strategies at the same time?
So that’s exactly what I did. Within 3 months, I started consistently making $10,000 – $15,000 every month, working part-time, spending very little money on marketing, and hardly throwing away any leads! And… I was outsourcing 80% of my business to Virtual Assistants! (But that’s another whole story.)
And guess what? I have been flipping lease options “full-time” now for almost 4 years, but I am still working “part-time”. The real exciting thing about this business is that it’s so easy to systematize and outsource! And you can do it virtually from anywhere in the world!
Here’s the quick and dirty low down of what Wholesaling Lease Options are & how they work:
- Find a seller who can’t sell their house
- Get the property under a simple Option Contract
- Find a tenant-buyer who has a good down payment and has a realistic chance of getting a mortgage in 1-2 years (there’s a lot of them out there, trust me!)
- Assign your Option Contract
- You keep the Option Deposit as your profit!
Real simple… really!
That’s why I love this business so much! Almost anyone can easily do 1-2 of these deals a month. And imagine what YOU could do with an extra $3,000 – $10,000 in “Hip Pocket National Bank” every month!