Many real estate investors find it hard to get started flipping homes due to lack of liquid cash available to them.
The lease/option tool works very well for securing and then profiting on rehab type properties.
But, as an investor, you might have limited resources to perform the repairs.
Here is an easy strategy that will limit your exposure and also make it easy to do the repairs…
The lease/option allows you to rent the home with an option to purchase at a later date.
You can write up your lease/option contract to last for 6, 9 or even 12 months.
Many home owners who own a property badly in need of repairs will be glad to do this with you.
During the negotiations, you could also ask that most or all of the rent payments be applied to the purchase.
Now all you need is to find a contractor that would be willing to perform the repairs and get paid when the home sells.
You might have to interview a few contractors to find one willing to front the materials and labor.
Setting up an LLC for the home flip is a good way to make the contractor feel at ease with floating the costs until sale.
Note: You will probably want to get the home under contract before going out and finding your contractor.
Many states allow you to add another person to an LLC.
Please double check everything with your lawyer before pursuing this strategy.
Make sure you get the lease/option put into the LLC’s name to purchase the home.
You can even offer to give the contractor a partial payment towards the repairs so that you have some “skin in the game” too.
Using this strategy will save you from fronting a bunch of your own cash & you can save yourself extra closing and financing costs.
While you are getting the home repaired, go out and find your buyer.
You can do what is called a double close and not have to purchase the property yourself, just sell your interest to your buyers.
If you followed our bird dog examples from a previous article, you should have no problem finding plenty of homes that need repairs with owners willing to do a lease/option contract with you.
Now go out there and take action!
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