First Time Home Buying Tips
Getting Back on Track
Need a home?
After losing our own home during the recession a few years ago, we were devastated but we also knew we were not alone.
As everyone is well aware of, there has been more home foreclosures in the last 3 years than any other time in North American history.
For many reasons, home owners are simply just walking away or forced from their homes and either declaring bankruptcy or relocating, trying to rebuild their lives.
Maybe you are a young family just trying to get your first home but the banks won't touch you.
I don't know what your situation is but whatever your reasons may be for wanting a new home to live in and you have very little or No Money or Credit problems, I have a very simply solution.
For those of you that know all too well, it's a terrible feeling to work so hard to build a life for you and your loved ones, then watch it all slip through your fingers knowing there is nothing you can do to stop it no matter how hard you try.
Speaking from experience, I know how tough it is to watch all your hard work slowly disappear right before your eyes and you are left trying to figure out how it got to this point.
What the Hell Happened?
If this is similar to your situation, here are some tips on how to start all over again on a real fast track with No Credit, Poor Credit, Bankrupt and Very Little Money?
Your credit is screwed or none existing. You've sold just about everything that is not nailed down. There is very little if any income coming in, along with who knows what other problems associated with all of that, so how do we get back into our own home or at least a nice home that we can afford and either own it or rent it out to make an income, with No Money or No Credit?
One powerful but simply answer! Lease Options.
Many people think a Lease Option is the same as a Rent to Own but from a legal point of view, they are not.
In a Rent to Own scenario, a typical situation is that you pay a monthly amount of money to the owner and whatever you pay above that amount goes towards the principle or total price of the house.
Also, whenever you put the word Rent on a legal piece of paperwork, the owner is responsible for all maintenance and those are just a few differences but Lease Options are different, more flexible and a more powerful form of controlling real estate so keep reading and you will see the difference
For our family, it felt like all of our hard work, money and dreams, we mistakenly thought, were gone forever when we lost the house. It's hard to pay bills when the cash flow dries up but the creditors don't care, they just want their money. They have no mercy.
We fought for nearly 18 months to try and save our home but at the end, we had no choice than to just walk away so for all you people out there reading this and have or are going through it, hang in there. There is hope.
I heard about Lease Options in real estate for years but never really understood what they were or how they worked, so out of basic survival needs, I learned very quickly all the ins and outs on how they did work which I would like to share with you. I hope this information helps somebody.
In our situation, we owed hundreds of thousands of dollars to the banks, finance companies, credit card companys. etc. You know the nightmare.
Tons of debt thinking our jobs and investments would last forever but guess what? They didn't. Sound familiar?
I know everyone has a different story but they are all similar in one way. Right now or very soon you will need a home or you have to sell your home to stay afloat before you are going to lose it all and forced to declare bankruptcy.
In our case, near the end of it all, we realized we had to make a move very quickly once the decision was finally made that we had to walk away from our family home so it was time to come up with solutions on how to get our own home with no money or credit.
I'll tell you one thing we did discover during that tough time. Once the realization became clear that we had to walk away from our home and we exhausted every avenue in trying to keep it, it felt like a huge burden was finally lifted from our shoulders. We were just too tired and burnt out to fight any more.
The biggest thing that use to drive us nuts were those relentless collection agencies calling at 8 am until 10 pm, 6 days a week. Why they think that by torturing people to death is actually going to help them get their money any quicker, boggles my mind. The ones that showed sympathy and wanted to work with us were always the first ones we paid when a little extra money did leak in but dealing with collection agencies is another story. Let's get back to the business at hand.
The information I'm about to share with you is based on fact and will work just about anywhere if you apply the information I'm about to talk about but for time's sake, I'm going to jump ahead to the fine tuned system we have today and not go through all of the learning curves we discovered the hard way.
To begin, there are three factors you have to consider before you begin looking for a house.
One is to decide on exactly where you want to live whether it's in the same neighborhood, same town, same state/province or the other side of the country. The only limit here is what you put on yourself. Everybody needs a fresh, new start in their lives at some point in time. Maybe it's time for you.
Second is what type of monthly payment amount do you feel comfortable with at this point in time. The one positive note if you are at this point in your lives, you probably have a lot less bills to pay which means you have more disposable income to utilize or maybe not. You might have lost your job and the cash is drying up real fast. Doesn't matter right now.
There can be many factors involved in figuring out your money status and how to get money but even if you are renting, you are going to have to pay something a month so stay within your comfort zone for now and put that rent money to work for your future.
You are about to enter an exciting time in your life so don't add more pressure on yourself by paying out too much. It's the same trap you might have just got out of so keep it real. You can build it all again only this time, do it right without tons of debt because more than likely, that's what got you in this position in the first place so it's time to work smart instead of hard.
Maybe you have no income and are staying with family or friends so it could be time to relocate to someplace with better economic opportunities. Only you can answer that question
Third is moving expenses. If you decide to move to California from Maine and want to take all of your furniture and belongings with you, you are obviously going to have to rent a truck with all of the additional expenses incurred along with travel and set up expenses in the new location. Plus you will probably need some living expense money to tie you over until you get back to work so think that through very carefully
If that is your decision but money is really tight than you should seriously consider selling all of your stuff, except personal belongings, to get you that extra cash you'll need to help you set up in a new life and new beginning. It is all materialistic things that you can buy again so dump it all if you need to. Travel lighter and less costly. Time for a yard sale.
Do not worry about down payments, credit or deposits because they are not a factor in Lease Options.
Did you know that before the recession, an average of 15% of all people were highly motivated to sell their house. They might have lost a job, someone passed away, age, health, military transfers, divorce, location, injury, etc. etc.
There could be millions of reasons why they have to sell but they have to dump their properties and many will carry the mortgage or help you with financing just to get rid of their property. That number has probably doubled now but I'll talk more about that later also.
To begin, let's say you decided on the location you want to live in so now we have to find the right house and the right seller.
My favorite place to look for motivated sellers are on these new real estate websites were owners sell the properties themselves. On these sites you can talk directly to the owner instead of a real estate agent and that's exactly what we want to do.
Unless real estate agents have owned their own investment properties, they do not understand Creative Paperwork which I'll talk more about but our goal is to talk directly to home owners anywhere you can find them.
Most agents work by you having the down payment plus an approved mortgage and they find you a house. Nice and easy all tied up in a pretty bow but in today's real estate world, both buyers and sellers have to be more creative which makes Lease Options a perfect fit for both parties.
In Canada a company called Property Guys for owners selling their own properties, is getting very popular or classified ads but there are many out there now so find one.
OK, you've decided on the area you want to live in so start looking online at the properties available in that general location.
Remember, don't let the asking price scare you away. For one thing most of the houses on those sites are highly over priced because the owners put a lot of emotion in the price of their own home and don't really consider what the fair market value really is.
For Example: I recently closed on a fully furnished, beautiful 6,000 sq. ft., 7 bedroom, 4 bathroom house, over looking the ocean with 10 acres of land on a 3 year Lease Option with No Money Down and No Monthly Payments, locked into a 3 year lease with the option to buy when ever I want, if I even want to, at a pre-determined selling price.
I know. What the hell did he just say? lol. Just keep reading and I'll explain more.
I'll tell you exactly how I did that deal in this article and what I 'm doing with the house to pay for it with absolutely No money out of my pocket and besides the monthly basic utilities and a few other small bills, it's all profit coming in but lets keep it simply and back up a few steps.
It might sound complicated but it is easy once I show you how, just like everything else in life but let's focus on you just getting a home to live in one step at a time.
Now obviously those types of deals are fairly rare and you might be thinking, how are we going to make payments on an expensive home when we can only afford say, $800.00 a month, for example, but the point I'm trying to make is that you just don't know until you ask so just ask. What have you got to lose? Nothing! The worst thing that can happen is that they just say No but the thing is, you never know what is going on with that property unless you ask.
For example: What if the owners of the house you like own it outright with no mortgage payments but cannot keep it up for whatever reason, cannot sell it and just want to get rid of the headache so instead of them worrying about it all the time and sinking money in it they don't have, you take it over and pay them $800.00 a month with say 50% or $400.00 going to towards the principle (total price).
End Result: They got rid of the headache and now they also receive a positive cash flow of $800.00. a month and you got yourself a beautiful home within your budget that you may or may not own if you choose to.
I'm not saying you ever have to buy the property unless you want to but at least you are living a lot better lifestyle which makes you and you family feel a lot better and also gives you 2, 3 or 5 years to get back on your feet and get re established.
It's a win/win scenario for all parties involved and that is exactly how you want to approach every deal. It has to work out for everyone's best interest or it just won't work.
Scaring you yet? No worries, it's all good so just keep reading.
OK. Here we go!
You are on a property owners listed website and have found the location you would like to live in.
You also found all the houses you would like to live in so whether there is 1 or 100 doesn't matter. The more the better. More options for you.
Now you look for a link on that website were you can send the owners a private message and here is what you are going to say in your email.
We are relocating to the area and were wondering if you would consider a short term Lease Option on your property for sale on the "Homes for Sale by Owners" Website, listing #123456 if we offered you your full asking price.
signed: Mr. and Mrs Happy, lol
That's it. That;s the question you are going to ask everyone.
Now it's a numbers game. As I mentioned, if there are 100 properties in that area that you would like to live in, send that same message to everyone of them with a return email address and wait for results. Just copy and paste the same message over and over again.
A little tip is that you always put the listing number of the house in the body of your email because some people might respond through another email address instead of that website's reply tab and if you don't know what house it is, you have no idea what house they are talking about. A real problem if you blasted out 100 emails to 100 different home owners.
Remember that at least 15% or more of those home owners are highly motivated to sell so now we are sitting back and watching for positive responses and believe me, they will come.
Some will come back saying something like this: I'm sorry but we have to sell our home to get the money to buy another one. Obviously that one is going no where so write them back saying: Thank you, we understand their position but if anything changes, please keep us in mind and then move on to the next one
Others will come back demanding this and that so don't even bother. Things you 'll hear is that they want a huge deposit and a guarantee that you will get a mortgage at the end of the Lease Option Term, etc. etc. None of that will work for you at this time and they are not motivated enough for my liking and believe me, not worth your time or trouble BUT:
A few will come back and say something like this:
Yes, we would love to talk to you about a Lease Option but we are not quite sure how they work so here is our phone number if you would like to talk more about it. BINGO. There it is!
Now that is what I call a very positive buying signal and things start to get exciting. I'm not saying that is the right deal for either of you but at least you are seeing positive feedback and your believability factor just kicked in as well as your confidence level begins to grow.
Warning!!! Once you get to this point where you have people that are interested in knowing more about what you have in mind, NEVER, NEVER, NEVER start whining about your problems no matter what they are.
Another tip here is that when you do find a few motivated sellers in the same area, try to set it up so you can go view them in the same day, especially if they are a fair distance away. Money is tight, gas is expensive so work smart and never talk about the lease option over the phone. Just set up a time where you can go look at their home as if you were buying it.
If there is no way you can go visit these home because of distance, money, time etc, then you can really qualify them over the phone by getting into greater details of what you are looking for and what they are looking for to see if there is some kind of an agreement you guys can work out that works for all parties involved
As your confidence grows and you gain more experience, you will naturally begin to qualify them a little more to see if it is a waste of time but for now,if possible, go look at some houses. It's exciting
These people have to know that you are capable of taking care of their home and paying the monthly payments so keep it positive no matter how nervous or beaten up you feel. Keep it all business until the paperwork is signed.
Paperwork! What Paperwork? lol Just keep reading
I know I lost a few nice deals like that in the beginning by talking too much about ourselves and what we just went through way too soon and blew them away.
You just want to build a friendship with these people so relax, take a breath but sound confident no matter how nervous you feel. People like confidence. You are moving to the area and you are looking for a house. That's it
Now you have to go into the deal with them knowing what you are looking for and you having a clear idea of what they want. This part you won't know until you start talking to them but some things you want and are thinking about in the back of your mind are:
1) The right monthly payment amount
2) No less than 50%, preferably 100%, of the monthly payment amount going towards the principle
3) The option to buy in 2, 3 or 5 years or less at a fixed "locked in" price no matter how much money you sink into home improvements.
4) Whatever else within reason
In return you will pay all utilities, the monthly payment amount as agreed upon and guarantee to do all maintenance on the property. Any minor repairs you will take care of and any acts of God causing major damage like flooding, fire, hurricane, tornadoes etc. will be covered under their home insurance which they have to keep in their name because you do not own the property yet, Right!
Also, you might want to give them their asking price when you are ready to buy as another incentive for them to hand it over to you
All of these details can be discussed over the phone or by email so you don't have to waste time or gas to go look at the property again until you find the right deal.
Remember that out of 15 people you talk to, maybe only one is the right opportunity so just keep doing the numbers and talking to people. It also makes for good practice.
Now remember, this is just one example of putting a deal together but it is something you are going to have to learn yourself because each motivated seller has different needs and there are millions of different stories out there.
Maybe you wanted it furnished. Maybe they are moving out of the country working abroad for a few years. Who Knows?
I don't know what it's going to take to work out an arrangement with these people but if you want the house and they want you to have the house, then put the deal together that works out good for both of you but you have to PUT IT IN WRITING! before you move in.
Do not move in unless you have it in writing. Anything can happen if you don't.
Here you will need a very simple but legally binding template of a Lease Option Agreement which I have.
Just let me know that you want one and I'll email you one. No problem.I don't think there is anyway I can attached in this article
The template will have all of the categories you need listed on 2 pages so you can just fill in the blanks. Make copies as you need them so do not write on the original copy
I know what you are going through if you are reading this so please do not think there is any hidden agenda attached on my part. After all these years and everything we went through, I found that I get a lot of joy out of writing and sharing information that might help others so if you need help in this area, no problem. I'll walk you through it.
Oh yea, That 7 bedroom house I talked about earlier. Guess how I got it?
I just asked them what they were looking for after they responded back to that same email message I mentioned earlier. That's it. Thank God for email. lol
They lived outside the country and inherited the house. To avoid many foreign taxes they could not charge rent or want any income creating a paper trail. They didn't want to pay property taxes, the utilities expense or maintenance costs and for those of you living in colder climates reading this, you know what it costs to heat a big house in winter.
They just wanted some one in there that was responsible enough to look after the place so they didn't have to worry about it until it sells and they also wanted a place to crash for 2 weeks every year when they came up for a vacation. No problem
It was becoming a major headache for the owners and they were very open to anything I would suggest. Very motivated sellers
Now I rent out rooms to the tourists for $100.00 a night and have a local, wonderful lady taking care of it all for free room and board with a weekly allowance. All cash. No credit cards or debit accepted. It averages over $3000.00 a month in positive cash flow. Sweet deal. I wish i had 100 more just like it.
I just collect cash once a week and pay out what ever I have to, to keep it going. Between you and I, why would I ever want to buy it if I don't have to but that will be a decision I'll have to make once the 3 year lease option is over.
The owners are happy either way because the house is well maintained and even if I do not decide to exercise my lease option and buy it after the 3 year term or sooner, they can put it back on the market at a higher selling price as the real estate market rebounds, like it always does and their house appreciates in value. It's a good deal for everyone.
If you tried to tell me I could put a deal like that together a few years ago, I would have looked at you like you were nuts.
Now that type of deal came with some confidence building so just take one step at a time. Find a website or some form of advertising where owners list their own properties for sale and send them an email written just like the example I gave above and see what happens.
It's a lot of fun once you get over your initial nervousness so go for it but there is one thing I will guarantee. If you don't do something now to change your circumstances, you will be in the same spot next year or maybe longer so what have you got to lose?
Also keep in mind that after the term of the lease is over or at anytime in between, you have the options to walk away from the property if you cannot get a mortgage or even want the house anymore.Sometimes you can't see hidden problems with a house until you live in it for a year so maybe you want to walk away. No problem with lease options. You are in control.
You can also renew the lease agreement again for another term after it runs out, if the owners are in agreement but here is sweet part. The owners cannot sell the property from under you as long as you are keeping up your end of the bargain during the agreement's dates unless you agree in writing and that's what makes Lease Options so powerful so just make sure you keep up your end of the bargain and you will have no problems
Thanks for your time and if you have any questions, fire them at me