Real Estate Investing Blog

Don’t be greedy. Aim to make reasonable, short term profits. A 10% profit over the short term is better than a 50% profit that you never get.

Remember, the higher your profits the shorter term your Option should be allowed to remain. If you can see a gross profit, then close the Option fast and get into ownership. Otherwise, the owner could balk later on.

You’ll do much better with distressed or highly motivated owners who have a problem you can solve. Once you solve their problems, the Option is easy.

Avoid any kind of technical jargon. I don’t even like to use the word “Option” because it is usually misunderstood. A misunderstanding leads to lower profits and legal difficulties. Speak in language that conveys the most information to the listener. That’s rarely real estate-ese.

Beware and be wary of buying Options from unstable or tricky people. In those cases, it’s far better to place the title to the optioned property into a title company holding trust, land trust, corporation, your name to prevent it’s being clouded by some future event such as divorce, bankruptcy, break up of a partnership, law suit, judgment, new financing, etc.

When you know you’re going to sell the property, use the prospect of that near term cash as a part of your negotiation technique to whet the appetite of the lender.

If you’re going to get cash, try to get the owner to accept a little cash and a lot of other things such as the car mentioned previously, old low interest rate notes you already hold, hard to sell vacant lots or time shares, etc. This way, when you’ve sold the optioned property for cash,’ you’ll be able to keep most of it and at the same time, effectively, you’ll have sold your property to the owner for the cash he might otherwise have received out of the transact ion. You accomplish this by giving up your property for Option consideration ahead of the sale and receipt of cash!

You can get Options more easily from owners who are in need of CASH, MANAGEMENT, SALES EFFORT, MAINTENANCE, or TECHNICAL REPRESENTATION.

You’ll be able to get PURE OPTIONS more easily from those who need cash or services but who intend to remain in their property or to keep control over the cash flow from any rentals or income properties.

When structuring Option terms, always exchange something if possible. This will not only put cash into your pocket, but could generate long term capital gains in a very short time. And it’s often much faster for selling.

When dealing with the average person in smaller properties or houses, be careful not to frighten the owners with too much paperwork. Use Options with simple language, lots of white space. Except in the context of a lease/Option, it’s best not to use the word OPTION at all! Tell then what you plan to do rather than labeling it. Use VERBS versus NOUNS. The better the owner understands what you want to do, the more chance he’ll agree.

In today’s investment climate, the real key to profits lies in the cash flow the property can be made to produce. One way is to use effective management methods that will enhance property cash flows. We also try to make the point that proper structuring of a transaction is the foundation of all cash flows. When one focuses solely on being able to buy with NOTHING DOWN, one gives up a lot of selection and negotiation possibilities. But the Option resolves the problem by offering the most leverage with the least risk and loss of cash flows.