What Is Lease Option?

The number-one alternative to doing a
straight rental in real estate is what you would call a lease option or
sometimes commonly known as a rent to own. Yeah, my name is Kris Krohn i became
financially independent at the age of 26 when my first 25 properties were lease
options and ultimately helped me produce a six-figure residual income so I could
quit my job. I have a lot of gratitude for this amazing program
so I actually innovated it and I took it to the next level and today, I’m going to
break it all down for you. What is a lease option? When would you do one? How
would you do one? And why is it more than twice as profitable as a straight rental? So you want to be in the long-term
holding game of real estate and you want to maximize your profits. And that’s why
you’re watching today’s video on what is a lease option compared to what is a
rental. And today what I’m going to do is I’m going to be sharing with you what
I’ve done in the game a lease option that has upgraded it from anything else
that’s out there and the 5 major profit centers that make it far more
profitable than you could do with a rental. Now by the way the first book
that I ever wrote the straight path to real estate wealth. I just updated and I
ordered a truckload so I’m giving them away for free that’s on the link below.
This documents how I arrived at a strategy that is a twist. A derivation to
the lease option called compassionate financing. And compassionate financing
means that we are going to utilize this home in a manner that we want to be a
greater benefit in value to another family that’s out there. So before we get
started, I want to acknowledge my amazing white pad here that I used up all the
pages and now I’ve turned them over and it looks pretty crappy but I feel
grateful in this four world country to have mostly whitish paper that we can
write on. Lease option is really meaningful to me because it’s how I
became financially free. like I connected my freedom date 4 and a half years
after investing of being able to retire and travel the world with my family and
live the most amazing life. I credit it to the strategy. While I use the strategy
in some facets of my business and I’m leveraging a lot of other nationwide
strategies. Lease option is something you can do in your backyard. Very profitably.
Takes me back to that time when my wife was doubting everything because we just
didn’t have money in the bank account. And we were newly married. I wanted
nothing more than a solution. I knew that a solution meant that it didn’t matter
how much money I was worth. It mattered how much money I had residually coming
in. What a lease option does is it puts more than twice as much money in your
wallet than a normal rental agreement and I’m about to break down why that is.
How do you produce twice the profit with a lease option? Well number 1 – cash flow.
If we’re talking about single-family homes,
purchase below the median which means under $220,000
generally. A rental might produce for you
$200 a month of cash flow but on a lease option, it’s more than
well that. On average, I have found it to be $500 a month and we’re not taking
deductions out of this like we are in a rental. Rental, you get 200 bucks a month
but guess what a repair comes up, you got to pay for it. And if you’re paying for
property management, property management is going to absorb most of that. This
home manages itself that $500 ends up being $500 a dependable money that’s
actually in your pocket. So for the brand-new investor, that’s actually
really important. This is what made the difference for me and my wife. The second
thing that makes a lease option different than a rental is that a rental
will give you a refundable security deposit. They give you a little bit of
money for cleaning carpets and whatever they break and then you have to give it
back if they didn’t break things. But with a lease option, what they do is they
actually give you a down payment. Now the contracts, will never call it a down
payment we call it option consideration. Because we don’t want this language to
constitute real ownership in the property. It’s that they have an option
to have future ownership should they buy the home. Now a down payment on average.
for me is $5,000 So now listen, I get $5,000
non-refundable, upfront, in my bank account and I’m getting $500 a month
cash flow. So just think about that for a minute
that’s $6,000 a year in cash flow. five grand up front. That’s 11
grand. That’s almost $1,000 a month on average that you’re getting for playing
this game. Thing number 3 that makes lease option very different and very
special is we mentioned it just a little bit. It’s for repairs. With the rental when
something breaks you pay for it and sometimes property managers make half of
their money from making repairs bigger than they need to be so that they can
make some money. It’s a profit system for them. But with the lease option, these
people that are in the home like a rent to own, they actually want to buy the
home. And so we’re saying this is yours. Like you fix it up. You update it and then
you buy it. All the repairs, they know that it’s on them. And at the end of the
day, that’s usually a couple thousand dollars a year of savings. So it doesn’t
eat into your cash flow, certainly doesn’t even your down payment and
they’re basically saying, “I’m going to take responsibility for this house now because
someday I’m going to own it. Number 4 has got to be one of my favorites. Management.
I do not need a property manager. This family says, “This is my home. I’m going to
buy it, I’m takingcare care of it. I’m responsible for that and
so it’s great about the management side is that I don’t have to be in touch with
them on a monthly basis where you don’t have conversations about repairs or when
they’re moving out. We know that they want to buy this. So itself manages
itself. Which I cannot even begin to stress how much better that is than just
trying to manage straight rentals. And the fifth thing for you to be aware of
is the purchase price. Someday, they’re gonna buy this home and so I do a couple
of things here in my contracts and I’ve never seen done anywhere else that
create a lot of legal protection. We’re actually going to let the future market
to determine what they buy it for because we don’t know what the future
looks like. So they’re aware of that but. at the same time, I put a minimum
purchase price in the contract that says, Hey, but no matter what the appraisal
comes in at it, can’t be below here or else I get hurt.
And that’s where I secure some of my profits and I make sure there’s enough
room where there’s some equity for them. But I also know that I’ve secured a
minimum return that I’m going to get as well. These 5 things, when you added them up, they’re are a lot more than twice as profitable than your typical
rental. In fact, the only time you’d ever do a rental is if you were going with me
into high-capacity investment-grade markets that were designed for rentals
with person returns identical or even sometimes higher than Lease Option. But
they’re out of state. And so out of 324 markets in the
United States, there’s always 3 or 4 best markets where you’re going to get
so much cash flow and so much growth that it can compete and outdo what you
see here on the lease option. But this is your backyard strategy. This is what it
looks like. Perhaps the coolest and final thing I want to share today is that you
can get into lease options with putting 20% down and buying the house you know,
30 40 grand but you can also do a version a lease option that’s called a
sandwhich lease you could actually find a Tiger landlord. That just wants to
sell the thing and you can walk right into the property and let them be the
bank and not have a down payment and then you turn that rental into a lease
option and turn it into a huge profit center. Super cool, right? So right there
at the end of the day, that’s how you can get in the game whether you do or you
don’t have money. Now one of the things that I love to do is put myself in your
shoes and say, “Hey, if I were you what would I do? if I was Jasmine, Shane
or Teddy that’s watching us. What would I do if I were you to create that wealt?h
I’ve actually created an elaborate system and team that are actually on
standby so that if you click a link below and say hey I definitely want this
book for free. Thank you Kris. I want the manual on how to do this. But if you go
above and beyond that and say, “Hey, I want a game plan on what can I do today to go
fast? What can I do to secure my financial future. I got a team on standby
that will actually put themselves in your shoes as if it were me. And they
will share with you exactly what I would do as if I were you and show you how to
build that wealth. Getting an outsider’s perspective, different than your own is
sometimes the key to your most massive growth. So take advantage of that. In the
meantime, make sure that you are subscribed because guess what’s coming
tomorrow? Another video that I’ve made for you
I’ll see you tomorrow.

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