Do I need CREDIT for L/O's with Tired Landlords? - Posted by Lenny

Posted by MM. on October 15, 2002 at 23:54:19:

Hello Lenny,

First off let me clairify that most land lords arn’t accustom to giving rent credit unless the happen to be a lease option investor. A rent credit only applys to how much is comming off your option to buy the home each month for example if you had the land lord crediting you 200 a month toward your option then at the end of one year your option to buy the property would be 2400 dollars less then the origional option price . I think what you ment was there accustom to taking a security deposit this is seperate then a (option payment ) the option payment it’s self is what your paying the seller for the ( option to buy) some sellers may want this to be just the price you pay to have the option other sellers will knock that amount off the price . Now as for the credit i’m assuming you intend to sublease this property to a tenant buyer . If so why not make the deal subject to your tenant buyers credit approval from the origional seller unless they don’t read the agreement they will know your subleasing so it’s best to just get it out in the open form the get go . they may think what do they need you for if your just going to sublease it well if this happens and your contract allows it you could Assign a tenant buyer for them this is just one form of flipping and would not put you in the middle after you assigned the tenant buyer. i feel it’s important to have a buyers list before a home myself if you had built such a list you could inform the land lord of this . good luck

Do I need CREDIT for L/O’s with Tired Landlords? - Posted by Lenny

Posted by Lenny on October 15, 2002 at 23:26:25:

Just a quick question, when trying to find “tired landlords” for possible Lease/Option deals, how can you get by without any money or credit?

I know you’re supposed to find really motivated landlords, but what if you only find a somewhat motivated one? I mean landlords are used to asking for rent credit and doing credit checks. I can see getting past the rent credit, but what if they want to do a credit check? I have horrible credit and I don’t want to blow a good deal because of it. How do I get around it?

Thanks to all who reply!


Do I need CREDIT for L/O’s with Tired Landlords? - Posted by GL(ON)

Posted by GL(ON) on October 16, 2002 at 10:28:23:

Tired landlords usually don’t screen their renters very well. That’s why they wind up tired.

If your credit stinks then I guess you are going to miss out on a few deals if they check. But some won’t check, and you only need a few to get started.

In the meantime straighten out your credit. The magic of real estate investing is that you don’t need much money of your own, you use other people’s. This means credit, which is based on trust.

Going in debt to make money is completely the opposite of going in debt for consumption.

If you want to make a lot of money you are going to have to shoulder a lot of responsibility. The trouble you get into with a few credit cards and car payments is NOTHING compared to the trouble you can get into when you are responsible for hundreds of thousands of dollars in real estate. You have to get used to the idea that you are responsible, no excuses and no passing the buck.

If your money handling habits are bad then becoming a complete square where money is concerned is your first priority. Without that you are doomed.

Re: Do I need CREDIT for L/O’s - Posted by KC Questions

Posted by KC Questions on October 16, 2002 at 01:10:16:

What I normally do when talking to Landlords about lease optioning their property, is to state the benefits my company can provide them and compare that with what a property manager would offer.

In my opinion, if the seller thinks that you are an alternative to a regular tenant, they are going to expect the same requirements of you (credit check and security deposit). If they think that you are an alternative to a property management company, they are going to treat you like you are providing a service to them (which you are), they might be a little more accomodating (references definitely help).

I normally tell sellers something like this so they can see what’s in it for them.

I tell them that if they choose a property manager, and there is no tenant in the place, the property manager will not be coughing up any money to help with the mortgage, but we are guaranteeing to pay the set amount regardless of whether there is a tenant in the place or not.

I tell them that once a tenant is found, a property manager will typically keep the first months rent collected and they normally charge 10-15% of each additional months rent that the tenant pays for commission. We get paid the difference between what we charge the tenant and what we are obligated to pay the seller each month, so it is in our as well as your best interest for us to put a quality tenant in there.

If something breaks in the house, the PM is not going to pay to get it fixed, or if they do, you can expect them to bill you for it later, and some of the charges might even have some markups to give the PM some additional income; for instance I have heard of one case where a property manager charged the owner $25 to change a light bulb. If you do business with us, we handle all of the maintenance and repairs on the property.

When I first started, I would tell sellers what I was offering and compare that with them finding a regular tenant and that didn’t work so good for me, so I started using this strategy and have had a little more success. But, what I suggest is for you to try a few different things and see what works for you…

CORRECTION - Posted by Lenny

Posted by Lenny on October 16, 2002 at 24:07:38:

I didn’t mean to write “Rent Credit” on this post. What I meant was a “Security Deposit”.

Sorry for the confusion. I just got my terms mixed up. I wasn’t thinking.