In the real estate business, it is important for us to have multiply exit strategies after investing in a real estate deal. Lease options and subject to deals are two of the most commonly used exit strategies that real estate investors use.

The Difference Between a Lease Option and a Subject To

The difference between a lease option and a subject to mainly lies on the ownership. With a lease option, you as the investor have a right to control the property without owning it. With a subject to, however, you get the deed to the property. This means that not only do you have control over it, you also have ownership.

The main key point in choosing between the two strategies is in determining the seller’s financial status. In choosing to lease option a property, you have to make sure that the seller or property is not in financial distress. The seller must not have any bad debts on him.

In a subject to, however, a seller or property in distress can be considered. On reason why you’re getting the deed to the property is so that the seller with a bad debt won’t screw up the deal. Of course, in a subject to deal, the property does not necessarily have to be in financial trouble. You can also do a subject to with sellers and properties that are in good condition.

Sellers and Buyers of Lease Options or Subject Tos

Real estate investors know that the lease option market gains more profit than rehab and is worth five to ten times more than retail. But putting aside the benefits a real estate investor can get, the real goal of every real estate deal should be a win-win-win situation, wherein you’re not the only one who ends up happy with the deal. The win-win-win type of deal also gives sellers and buyers benefits for selling or buying the property.

So what motivates sellers to go for a lease option or a subject to? The main reason is to have debt relief. They will be cleared of their debt, whether good or bad. In the case of a lease option, only those of good debts are considered. Other reasons could include new events in theirs lives — marriage, divorce, job transfer, or losing a job, etc. The bottom line is that the sellers will get to go on with their lives and stop worrying about their debts and their property.

As for the buyers, they will always be in a win-win-win situation. This is especially because or the riding market of real estate lease options and subject tos. Buyers need real estate investors. The country is full of people with bad or poor credit, and they are ready to buy lease options or subject tos.

System For Lease Options and Subject Tos

Having a system has been consistently advised by many successful real estate investors to their colleagues. Negotiating lease options and subject tos require no less if you want to make it big.

The first step is getting a deal. In getting a good deal, you have to first generate possible leads. One of the best ways to get leads and, in the process, get a deal is to find a good realtor to work with.

Realtors actually control about 80 to 90 percent of the market. They also have what you would want when looking for good properties — a sellers list. What’s more is that they realtors tend to know a lot about the sellers and issues concerning the sellers (divorce, financial trouble, marriage, etc.).

You can find realtors in many ways. Start first with a realtor you know. Then ask for his or her network of realtors and go from there. You can make letters or presentations with them. The one thing you have to remember to gain a realtor’s connection is to explain how you can help them in return for getting their sellers list.

If you help the realtor, and you help the seller, then you get the deal.

Your customers are an essential part of your business. It is they that will determine the success, or the failure, of your business. You business will eventually reach its peak when you’ve got customers who repeatedly avail of your products and services. But without customers, your company might go down the drain.

In garnering customers and getting them to choose you and your products and services, there is one thing that every management has to focus and improve on. Customer service is becoming more and more important when it comes to management and selling. It affects your customers’ view of your business and how you run it, and it will therefore determine if the way you and your employees carry out your business is worth their time and money.

About 80% of customers go somewhere else because of poor and indifferent customer service. The average American business loses about 20% of its customer base each year due to poor customer service.

Many companies employ a unique selling proposition to generate more customers. But nowadays, it’s not easy to have a selling proposition that is unique enough for the company to get more customers.

This is why businesses nowadays choose to employ a selling proposition that has the biggest chance of generating repeat customers, and that is none other than a great and make-you-happy customer service! It may not be unique, but it will make you one of the few companies that a customer would prefer to go back to.

Of course, you would also have to be the company that provides a customer’s needs. You would also have to be a company that can be relied on and delivers on time always. Delivering the best of what a customer wants is part of a great customer service.

Great customer service begins in the management itself. You have to manage your employees in a way that you are also giving them great customer service. You also need to see to it that your employees also treat each other the same way. Giving great service to each other will help you and your employees deliver on time and doing things right. As a result, problems regarding execution of tasks are minimal. By treating them as customers and giving them great service, they will be able to go about their tasks on time and with little mistakes.

The same thing goes to your company’s suppliers, retailers, and other business associates. They are in a way your customers — customers to your business. Therefore, giving great customer service to them will get them to work with you more. The effect of this is that they will produce results and deliver to you on time as planned as well. This will increase efficiency in your management and business.

Great customer service also gives your company what it needs the most to be successful in the industry — repeat customers. When a customer is very appreciative and is very satisfied with how you have guided him or her in her purchases and orders, he or she will surely come back again for your assistance.

Remember that it is never okay to give anything less than appreciative service to a customer. Remember, too, that happy customers will come back to you!

In real estate investing, there are four key points in making a profit — wholesaling, retailing, lease options or owner financing, rental properties. Among these four, wholesaling can be considered the easiest and fastest way to make money! Let us not forget: Cash is King!

Wholesaling involves finding a bargain property and passing it on to another real estate investor. That investor will either buy and resell the property or buy and hold it.

So why wholesale a property you invested in?

• First and foremost, it’s quick cash! With wholesaling, you’ll be able to make from $5,000 to $20,000 in 30 days or less per property.
• There is low risk and high reward in wholesaling. You do not need to have a real estate license to do wholesaling. Yet you get profit out of it!
• As much as possible, you won’t have to deal with tenants or repairs or holding costs.
• You can do wholesaling as a beginner, intermediate, or experienced real estate investor.
• You might not have as much equity in wholesaling, but equity does not pay the bills and expenses you make. It does not equate to cash, and cash is what we need.
• Your assets are not at risk.
• Wholesaling is great when you’re starting in real estate. At the same time, you can make it into your long-term business!

How Does Wholesaling Work?

First, you find a property. Then you get the property under contract. You then offer the property to your exiting list of buyers. Then you match the buyer and seller and collect the difference between the price you negotiated and the selling price of the property. You will receive a check in 30 days or less each time you match the seller with a buyer.

Basically, this is how wholesaling works.

Finding wholesale deals isn’t that hard. There are a lot of ways to look for them. You can either drive around the area or you can look through tax records to look for properties that you can wholesale. You can also hire a skip tracer and do a private investigation. This way, there’s a chance you’ll come across a property that not all real estate investor has come across yet. And who could forget the Internet? You can look up on eBay for properties on sale.

You should also check up on the properties you found. You don’t want to buy and sell a property in a war zone. You would want a property that is in an area that is up and coming, and accessible to your buyers. Try to check on new properties in the area that might prove to be a good property for wholesaling, too.

Remember that in selling a property, you would want to offer a good deal for you buyers. If it’s going to have your name on it, you would want it to be a good deal for the sake of your business.

Properties you can wholesale include single family homes, multi-family homes, commercial properties, and lots and land.

Next stop is your buyers list.

Your buyers list is your most important asset when you’re a real estate investor. In keeping your business up and going, it’s good to have repeat customers. Having buyers ready enables you to work faster, harder, and smarter. Your customers will tend to expect better deals form you and you will be motivated to give them the best.

You can find your buyers through many ways. The most commonly used ones are advertisements and signs. You can also look them up on your Real Estate Investor Association or look up on the Web. Craigslist is a good source when looking for buyers. 

Create a System!

If you want to be successful on wholesaling, it may not be enough to do what you think should be done as the deal progresses. It is important to have a system for you to use and implement over and over again

The system you create would naturally consist of these steps:

• Finding deals
• Screening the deals
• Estimating repairs
• Building a team
• Finding buyers
• Construct and present offers
• Follow up on the deals
• Selling quickly

Nevertheless, it is going to be how you go about these steps that will make up your own system. And it is going to be your system that’s going to determine if you succeed in real estate or not.

People go into the real estate business for many reasons, the primary of which is money and profit. Another reason is that people would like to have a job that works with their personal schedule, a job that doesn’t require you to wake up early in the morning only to be reprimanded by your boss.

The world of real estate gives people a chance to have financial freedom and security. It allows people to work according to their own time frame and to their own potential. It allows them to be their own boss when making deals. Who wouldn’t want to make money that exceeds your living expenses? Who wouldn’t want to be his own boss in every deal he makes?

Becoming a real estate investor is also a big thing nowadays. There is presently what we call a “real estate bubble,” which a real estate investor can make full us of to be successful in real estate. The market has never been better for real estate deals, and foreclosures and pre-foreclosures are at an all-time high!

But the success of the market is not your success. Reaching success would mainly depend on you.

Mistakes of a Real Estate Investor

Real estate investors make mistakes. Some of which are just small problems that can be fixed in a glitch. Some are hard to overcome. Some, however, are present simply because the investor doesn’t look around in his surroundings more.

Some real estate investors, for example, would focus only in one niche. A real estate investor focusing on a buy-hold-and-rent may create monthly cash flows, but he or she will not be able to make it big. This is especially because of the many real estate investors that delve into not one but many niches in real estate. Focusing in one niche is very common. But expanding into other niches from time to time has become one of the building blocks to success in this business.

Another mistake of some real estate investors is the thought that one day the “big deal” will come. This deal will be the jackpot of their lives. These investors would wait and wait, ignore the deals that could give them considerable, if not big, profit, and end up starving. The real estate investor shouldn’t be the one waiting for the deal. It is the deals that wait for the real estate investor. It is the job of the real estate investor to find those deals.

A common mistake among real estate investors is that they don’t treat real estate as a business. Just because it does not have a time schedule and a monthly salary like regular jobs doesn’t mean that it’s not business. You are still going to be working with clients, managing a deal, and making money from it.

What Makes Them Successful

Looking at successful real estate investors, and other entrepreneurs, as a matter of fact, you will see that that there are two things that they keep and implement. The first one is education. Businessmen do well to educate themselves to work and to be prepared for any problems in their work. A real estate investor does the same thing. He or she educates himself or herself with the many ups and downs of the business — market conditions, successful niches, profitable areas, and many more. Education and knowledge are weapons when it comes to negotiations and deals.

Another thing that helps a successful real estate investor is his system. As a real estate investor, it is important to have your own system, something which you can employ and implement over and over again to make a successful deal. Your system should involve the steps you undertake ad the strategies you implement.

To be successful, it is also important to have the tools, the networks, and the support. Relationships with colleagues, with contractors, sellers, buyers, lenders, and others can help in getting you the best deals. Knowing what to look for, how to look for it, and how to optimize them can help get you to the top.

If you want to be ahead of the others in the business, what do you do? What does a successful real estate investor do to be on top of the herd?

1. Have a Plan

It helps when you know what to do and what the others are doing. Determine what your end result and goal is and commit yourself to accomplishing it. Having a plan allows you to stay focused and organized in making a deal and negotiating.

2. Operate In a Niche Market

It helps to stick in one market niche. You’ll be able to focus and look for potential deals. You would know what to do with them and how to go about them.

It is actually recommended that you expand to other niches, but only occupy a portion of it. For example, you specialize in foreclosure deals. But then one of your deals went under bankruptcy. Going into the bankruptcy niche will have become an advantage on your part. But as you specialize in the foreclosure deals, you decide to operate in the bankruptcy deals only when one of your deals go bankrupt.

3. Educate Yourself

One reason that a person becomes successful is because he or she knows what to do. Even the most successful real estate investor educates himself. This is because of the changing times and conditions of the market. You have to work knowing what the conditions of the market and the homeowners are to make the deal successful.

Educating yourself can also help you expand your marketing strategies and management plans. You might be able to come across information that can be valuable to you and can help you with one of your deals.

Even when you’ve reached the top, education will never stop.

4. Understand Market Conditions

Studying the market conditions of real estates, an investor can see that there is growing competition in the market. Rising interest rates and housing prices also make it harder for you to deal with negotiations and numbers. As a real estate investor, you have to have an advantage over the others to stand out and make it big.

5. Use Systems To Simplify the Hassles and Headaches

Creating systems and using them help you become organized. Most successful entrepreneurs use their own systems, systems they are comfortable with, to keep their businesses smooth and sailing.

6. Stay Focused and Find the Deals

Deals make out a real estate investor. Using your knowledge, your system, and after studying the market conditions, you should find the deals that you can fix and negotiate.

Making the Deal

After entering the niche and educating yourself about it, it’s time to find your potential sellers. Know how to locate prospects. There are a lot of resources you can make use of to find sellers and properties. You can surf around the Web, drive around you area, or look into foreclosure listings.

When you’ve selected the area and niche that you want to cover, it becomes important for you to make yourself approachable and accessible. You not only should come to sellers and properties, you should also make them come to you!

A marketing strategy will allow you to make yourself known to your area. Send out mailing lists, develop marketing campaigns, or put out flyers or newspaper ads. Your marketing strategy should target your potential sellers. There should be a unique detail to your advertisements that can make them come to you and call you first before the others.

Talk to the sellers. Get acquainted with them and get acquainted with their property. This will help foster a comfortable relationship between the two of you and can make the negotiations go smooth.

You should secure your financing or funding as soon as possible. A lot of people would complain that the one thing that is holding them back in making a deal is that they lack the money for it. This should not be the case. There are a lot of financial resources out there — hard money lenders, private money lenders, banks, and more!

In closing the deal, you should have an exit strategy available. Your exit strategy can either be to hold onto the property you’ve bought and have monthly earnings, or you can sell it off to another investor. 

It’s already a given that foreclosure deals are a very competitive niche in the real estate business. Real estate investors try to get to properties first and with the competition, some survive and some just has to try harder next time.

This is one reason why investors are gradually turning to the bankruptcy niche.

Unlike foreclosures, bankruptcy has an atmosphere around it that could spell ‘doom’ and ‘end’ for a real estate investor. Once a property undergoes bankruptcy, you can no longer touch it. A lot of investors run away from it.

But that is not necessarily so. On the contrary, bankruptcy deals can bring you great profit!

Observe the Environment and Conditions

Looking at the homeowners’ side, there are a lot of issues to be dealt with. Lending standards have become more liberal, some properties have low or no down payment, and the average spending on housing have considerably gone up as compared to past years. Consumer expenditure has also risen, and unexpected events like divorce, death, and others may put the homeowner in a position wherein the mortgage for his home is in jeopardy.

Homeowners generally don’t want to move so suddenly. They would naturally want to stay longer in their own home. A bankruptcy claim can make this possible. It allows homeowners to stay longer in their homes as they consider their options on what to do when foreclosure starts again.

As an investor, you will see in observing these facts that there are bankruptcy claims that will be closed and foreclosure will start again. This would naturally translate itself to a profit for real estate investors.

Bankruptcy Leads

In time, the homeowners that filed for bankruptcy will realize that they will eventually lose bankruptcy protection, that the foreclosure process can come back on their doorstep again.

So what you would want to do is follow up on bankruptcy leads that you have access to. For example, if there is a foreclosure deal that you knew about that went into bankruptcy, don’t throw the file away. Follow up on the case at least once a month. Make sure that the seller knows of you. In the end, when the foreclosure comes back up, the seller might be able to remember you and contact you to take care of his or her property.

You would also want to be ahead of other investors. It would be clever to contact the sellers months before the other investors knew about it. Bankruptcy deals are usually ignored. Take this as an opportunity to contact the seller (who went through bankruptcy) and get acquainted with them.

Doing bankruptcy deals will also enable you to get the cooperation of mortgage companies. Homes under bankruptcy protection can hardly be touched by mortgage companies and this goes on for months and even years.

Make Bankruptcy a Part of Your Niche

Going entirely into the bankruptcy niche will give you some trouble, mostly because you will have to wait for the bankruptcy to be lifted up before you can work on the deal and this could take a lot of time. And it’s hard not to receive a salary for a couple of months.

Successful real estate investors don’t necessarily go entirely into the bankruptcy niche. What they do is that they only make the bankruptcy deals a part of their niche. In a way, it is like you’ll just be expanding your business to the bankruptcy niche.

There are three things that hold back a person from going into real estate. One is money and funding. Having time for real estate investing has also been a problem for some. The other is that they just don’t know how to start and what to do.

Money and Funding

Money and funding should never hold you back as a real estate investor. The problem with generating funds to invest in a property has been addressed by some of the most successful real estate investors and they have spread their ways to the real estate world.

Look for corporate lines of credit and investment group “pools” if you can’t get a loan from the bank. You can also ask from your family, friends, and associates. You can also look into hard and private money lenders!

Do I Have Time For Real Estate?

Absolutely! Many successful real estate investors started investing in real estate as a part time job. When they saw that venturing in real estate made more money for them than their job, they immediately switched to full time real estate investment.

Real estate investment is also flexible when it comes to time. Unlike regular jobs that require you to work at least eight hours a day and demands you to wake up early in the morning and fight traffic to get to the office, the real estate business just requires you to work on your own time.

How To Go About Investing In Real Estate

There is a blueprint in working in the real estate business. Generally, it goes like this:

1. Do a market analysis to determine which areas you are going to invest in.
2. Build your buyers list, contractors list, and a list of your other networks that you will be working with (realtors, brokers, rehabbers, etc.)
3. Determine what marketing strategy to use that will effectively reach the sellers in the area you chose
4. Quickly analyze any deal that can give you the most profit
5. Control the property with a contract or a flex option
6. Sell the property quickly to your buyers list
7. Get paid!

One problem in real estate investing is that there are times wherein you don’t get paid for months. This is because you don’t get to sell the property quickly. Many beginning real estate investors don’t get instant cash flow and have to wait for months. The result is that they would quit, having had no success in generating cash for the property they have to sell.

That is why the number one tip in getting cash inflow is to sell the property quickly. Selling quickly is the key to success. The faster you sell properties, the faster you are paid.

These three have been a headache for many real estate investors. But there are solutions for these problems, as have been stated above. Plus, you can also work out your own system as to how to invest in real estate to escape these nagging problems. The most successful real estate investors have founded their own systems and are eager to share it with others. But it may be more successful for you to find one for yourself.