Invest In Real Estate With No Money: What Is A Lease Option

Mark this video, you have asked and I’mfinally going to do it, I’m going to break out as much information as I can for you onYouTube on how to successfully transact lease options. If you’re looking for howto do real estate with no money and no credit and you want to do a deal in thenext 90 days regardless of your age or financial situation, friends, that’s whatyou’re going to find. Now I need to ask a favor of youbecause I can’t fit it all into ten minutes but what I can do is break itout in the next four videos and I’m bringing my business partner, StevenMiller onboard and the two of us are going to tag team and we’re going to rockout your lease option world in these next four videos to show you everythingfrom A to Z on how you actually successfully do real estate deals so inthe next 90 days, you can take a check to the bank.Alright, if I get one more commentwhere you guys are like, “What is a lease option?” I’m like, that’s it, we’re going tocreate a four part video series and we’re just going to give it all to youand we’re going to lay it down because if anyone else has one morequestion that I’m like, “Kris you keep leaving this out, what do you mean bythis?” I’m like, alright we’re going to create the definitive right now and it’s going tostart in this first video talking about what is a lease option, what are thenumbers, and it almost makes me feel like rapping even though I’m white and Ican’t. Kick up a beat. Lease options, so cool, get in, learn the stuff, it’s amazing. – We will never do that again, that is never happening again. Alright, so redeeming qualities however isthat we can teach you this.. – Kris, so we’re talking about lease options andbefore we get into the how-tos and the marketing of it and the contracts andwhatever, can we get into why they would want to do a lease option, like how doeshow does a lease option differ from maybe your typical rental.- Okay so, let’sget it, most basic concept and real estate is buy a house, rent it and makemoney and you know that’s a real deal, you can buy a house, you can rent it, youcan get a cash flow, if you hold that house long enough, you’ll eventually sellit for an amazing profit, you’re going to get cash flow because the market isalways what? Going up. It might be going down and up, down and up but over time, itis always inflating and it’s always going up so in time, you’re going to get agreat return. We’re simply going to share with you an alternative today likeSteven is saying of how you make a lot more money and today, we’re talking aboutthe 40K swing.In other words, lease options at a minimum, on average, give you$40,000 more than a straight rental.So a lease option is best said in one of twoways, you might be familiar with rent to own.. – Well that totally makes sense. – Irent it until I can own it and on a more sophisticated level, it’scalled a lease which is a rental agreement with an option to purchasewhich means, oh you mean I could get in this hole so I can rent it and then Icould have the option in time to buy it? That’s what a lease option is. Now thesefour videos are designed to go through everything from what is it and why arewe doing it to how do you buy one and market it to how do you sell it and whatare the contracts all the way to how you manage it and evenpurchase homes on these option with as little as no money, no credit so we’reactually saying that regardless of your age and financial situation statue,credit position, anyone can go out and do real estate right now.I challenge you inthe next 90 days with what we teach, you can take this information and go out. Socommit to watching all four videos and I want you to pull up pen and paper, I knowyou don’t normally do this but imagine that class is in session and we’re goingto give you everything you need A to Z right now on understanding what a leaseoption is and our invitation is, go out make some money and comment below and, ohmy gosh, I did it, it was so amazing, we want to see that from you. – So Kris, whatI want you to do right now because Kris, I’ll tell you right now.. Those of youthat don’t know, you may not talk about this often, Kris is a numbersnerd. – Wait. I’m a rapper. – Kris, no. He’s not a rapper, he’s a numbers nerd, heretires to his nerdery to crunch numbers like literally, you can see this guygoing crazy, it’s like, I’ll stop there..Anyway, the point is what he can be rightnow and what I want you to do, Kris, is that when you take a home and let’sjust call it a, let’s take round numbers, a $200,000 home, okay. So let’s sayyou’re going to take a $200,000 home, what I want you to do right now with thenumbers is help them see how investing this two hundred thousand dollar home,and let’s say you got it with a 15% equity position, can do that real quick?- So I got the home for one hundred and seventy thousand dollars, it’s worth two hundred thousand, worth two hundred and it’s like, how do I makemaximum money on this? – So what I want you to do is, I want you to be exactly separated,I want you go through a rental property if you were just to rent it and then Iwant you to talk about lease option with our system, what that would look like.- Alright, how’s that? – And this is what we’re teaching you right now, this is exactlywhere to teach you.- So this video is what is the lease option and why the heckwould I ever do it and then in video number two, we’re going to talk about howyou actually execute a lease option. So let’s do this example. I’ve got ahome and let’s just say that you had a house with thirty thousand dollars ofequity, this represents a 15% position and so the first thing I’m going to do is,I’m going to go into my market place and I’m going to rent this home and when I goto rent it, I’m going to assume that I have a payment on this house where I’mgoing to rent it for $1,200 but my mortgage with all of my payments and everythingis $1,000.- Now we’re just using some round numbersright now, these may not be exactly accurate although I will tell you, he’sgot a pretty good mind for this. – And this is showing a $200 cash flow, ifevery month I collect $1,200 and every month I pay a $1,000, then every monthI’m making $200, that’s what gets people into real estate in the first placebecause that’s your residual income. So I’m going to have some profit here and inthis scenario, let’s assume for a moment that we’re going to hold this home for fouryears.Okay so what could happen in a four year scenario? Well first of all, ifI am collecting that money, I’m making $200 a month and most people renthouses for a year at a time, let’s assume that I get a couple of repeats but I’vegot some vacancies, let’s assume that I have one month out of the year vacantand let’s assume that over the next four years so what that means is, I want tototally calculate here if you can pull out the calculator , Steven. Let’sactually break this down also and here’s what I want you to do, the first thingthat we need to understand is that there’s going to be a cost of holdingthis home okay and so what we’re going to do is, we’re going to have a $200 cash flowfor 11 months – Okay so 200 times 11, that’s2,200.- And we’re going to hold this for four years okay and that takes a vacancy in anew account so multiply that by four – Okay, so that, 2200 times 4, that’s8,800. – Okay so on my cash flow right here, we’ve got 8.8. – Whoops not exactly,yes. – 8,800 alright. I ran out of room we use K’s, so that’s$8,800. However, I have some extra expenses thatcome up along the way on this property, remember I have to cover the$1,000 for one month out of each of the four years so that’s $4,000 that I have and let’s also assume that on my expenses, I’ve got$4,000 in vacancy, let’s also assume that in repairs,let’s say, I’m dealing with $1,000 a year so it’s $4,000 inrepairs and let’s also say that I don’t want to be a landlord so I have aproperty manager that costs me $100 a month so $100 times 12 months is $1,200times 4 is $12,000 times 4 is $48,000.- $48,000 dollars in property management so I take $4,000, $4,000and $4,800, that’s total expenses of – yeah that’s $12,800 – okay so look look out the gate here, I’ve got$8,800 that is, that looks like it’s working outwell for me but it’s cancelled out with the $12,800 which means I am down for grant. I held the home for four years and I’vealready shelled out $4,000 more out of my pocket for holding thishowever, let’s just say in the next four years that the market actually goes upand my home is valued at two hundred and ten thousand dollars, okay, what’s6% of $210,000 cause now I need to do my realtorfees. – so that’s $12,600 and let’sthrow a couple thousand for some sellers concessions, let’s call it, let’s round itup, I got $15,000 in those fees for realtor and closing costs and now it’stime to figure out how much money did I really make on this.Well we owe 170 andthat they’re using 170, 210 is $40,000 so if I have $40,000, now we need tosubtract from that, the net difference here of $4,000, subtract the $15,000realtor fees and then don’t forget that you’ve got to put, you got toget it in four years up to market speed, let’s also assume that you’ve got $10,000 in repairs. – That equals $11,000. – Okay,by the way, I added a 1 here so $14,000 repairs.So how much is it?- That’s $11,000. – Okay so in this scenario, I wish had a different color here, we’regoing to say that I made $11,000 game. Now just check that out for just amoment, I bought a house, I owned it for 4 years, I did get tax advantage and at theend of the day, I made $11,000 and depending on what my down payment is, Icould calculate what my ROI is. Right now we’re just going to look at this big grossnumber and now we’re going to do the fun magic of what happens with alease option. When I’m actually doing, Steven, if I stand on this side, I can’twrite like this. Switch. Alright,so let’s do the same thing.Now instead of renting it for $1,200, it’s a leaseoption so what I’m actually doing is, I’m actually going to be renting it for$1,400 a month. So I’m going to say rent is $1,400 – There’s a reason why we’re able torent it for a little bit more, we’re actually helping people build equity inthe property – There’s people out there that want to get a house and the bankshave shut them down saying, your credits not good enough, your job’s not goodenough, there’s so many people, there’s a massive margin for people that want ahouse, can pay for a house and the banks say no. So we’re gonna charge more and ontop of that, I’m also collecting a non-refundable downpayment and the downpayment on this, we’re just going to say it’s one of the more typical homes, let’scall it $5,000 so I’m making my extra 5 G’s right up front on that but I’ve heldit for four years and sometimes the family that’s in the home doesn’t buy itbecause they needed the flexibility to get out, half the time that happens, halfthe time it doesn’t so we’re going to stay here with our average numbers that ithappens twice so over that four years, we’re actually going to collect that$5,000 twice, it’s $10,000 that we’ve gained up front onthat.We now have calculated a higher rent, we still have the same mortgage of$1,000 but our cash flow is way more juicy. Now, let’s start looking at theexpenses on this. First of all, we have the same thing on two vacancies so we’regoing to say that that our vacancies come to – so instead of four vacancieswhich is what this was, oneper year right ? Instead, we have only twovacancies. -S o on vacancies – so let’s call it $2,000 – it’s a $2,000 expense.Okay, next on repairs, we don’t have any. – There’s no repairs. – Why Steven? – Wellbecause in the contracts, we make sure that the tenants are actually takingcare of all repairs. I understand, this is their home now, the way that we set it up,the whole conversation is about them buying this property so they’reinvested in it, they want to fix it up and they do so there’s no repairs thatare coming out of your or my pocket.- Okay what about property management? – Oh there’s also little to no property management – because remember, they’re selfmanaging it, you don’t have to pay someone a $100 a month to doall that, the check comes straight to you, it’s self-managed. What about realtorfees?- Oh there’s no realtor fees, you’ve got your buyer already built in. Guys,this is amazing, no more 6%, no more losing $15,000 inexpenses at the end of the sale, it’s all already built in.- So what you’re sayingis, let’s calculate now our total cash flow. $400. Now we are going tocalculate two months of vacancy so I want you to go with first of all, 22months, no, excuse me, 44 months. 44 months at a $400 cash flow, so400 times 44 months equals seventeen thousand six hundred. We collected our$10,000 and down payments Okay now we do have $2,000 So we have our 10 and our 17 andso now what we’re going to do with all these numbers are, we’re going to startwhere we did before on this side. We have $40,000 gain from in four years sellingit for 210 but we’re into it 170, we’re going to take that 40,000 and add10 grand. – I’ve already done it now.- Add the rent, subtract that, what’s the total number? – $25,600 plus now the $40,000 – For a total of what? – That’s a total of$65,600. – Okay now just pause for a second. $11,000,$65k. Steven, what’s sixty five thousand six hundred divided by eleventhousand? Sixty-five thousand six hundred – okay sixty-five thousand sixhundred – divided by eleven thousand – divided by eleven thousand.That’s 5.96. – In other words, that is a 5.96 times higher term. Thatis a six fold higher return. We call it a $40,000 dollar gap in thissituation. The gap is actually fifty five thousand not forty in this particularexample. So I just want to ask, how many of you watching this video are thinking,wow I don’t want to hire a property manager. Me. How many of you are thinking,I want to actually push off all repairs and I don’t want those expenses? Me. Howmany of you thinking, I’d love to get paid up front when I step into the house?Me. How many of you want double the cash flow? Me. How do you want to avoid realtorfees? Me. Why wouldn’t you ever do a lease option? – It just makes sense. – It just makessense. Now understand where we’re about to head is, we’re going to assume that youhave a house and what we’re going to do is, we’re going to talk about what you can doto make maximum money on this house and in this next video, we’re going to get intohow you market it, how you show it, how you do it and by the time we get to thefourth and final video, we’ll even show you how to buy a house on these optionso you don’t even have to potentially have money out-of-pocket, you don’t haveto use any credit so if you watch this four-part series, we’re going to show youhow you can transact all of your real estate in this amazing microcosm and dowhat I did, age 26 retired with the net worth of 1.6million dollars that I kept on growing greater and greater and greater andfriends, this is the foundation I built all of my wealth on, claiming that it isthe single best strategy in real estate.Can you see how this is least time, leasteffort, least risk, more profitable. This works in every market, buying singlefamily below the median. Friends, this is the rock star way to go if you’re juststarting out and you’re like, how do I play? Keep watching. Oh man, we’re justwarming up. Are you like so excited for the next video and it’s like, okay Kris,now I understand why you love lease options. I now understandwhy I love lease options. Now how do I take it to the market? How do I take ahouse and start actually doing a lease option? Join us in the next video, I’mgoing to show you exactly how to do it..