Additional Revenue with Lease Option Programs

This is kind of a little secret that not too many real estate investors know about, but it’s a huge income potential for your business, especially if you do a lot of lease to own, rent to own properties. And that is having a down payment assistance program with your tenant buyers.

Now, what this down payment assistance program is, it’s simple. The people that are trying to lease option your property; they’re going to be giving you a non-refundable option fee. Usually that’s anywhere from 3% to 5%, it’s a couple thousand and upwards to maybe ten thousand, sometimes a lot more than that.

So, people are going to be giving you a non-refundable option fee, as well as determining their lease payment with you. But if you ask a simple question, which is this, “Mr. and Mrs. Tenant Buyer, if I could provide you with a program to help you build up your down payment so that way when you do go to the bank and get a loan, it shows that you’ve put in upwards of 10% to15%, rather than 3%, would you want to participate in that program? And it doesn’t cost you any interest or anything. It doesn’t cost you a dime to participate.” Of course, they’re going to say yes.

“Okay, great. Well, here’s what that program is. We have a down payment assistance program.  We’ve already determined what your lease payment is going to be. Is there any way you can contribute money over and above your lease payment each month to apply 100% towards your down payment?”

And they’ll say, “Well, what do you mean?” “Well, here’s what I mean. What’s the most you think you could pay over and above your lease payment each month to apply 100% towards your down payment? This is money that you can pay in installments versus having to come up with a large down payment chunk at one time when you go to the lender.”

“So, whereas a lot of people have problems building up their 20% down payment, you can pay it in over time and you can hopefully get to the point where you want to get to in order to achieve your down payment level when you do go to try to qualify for a new loan.”

It’s nothing more for you, as a real estate investor, than trying to generate some additional cash flow. So, if somebody says, in fact, in my situation I’ve had people pay in close to $400 over their lease payment each and every month to apply towards their down payment.

The only thing that you need to do is you have to write it up in the lease option agreement and you’re going to collect two checks from them each month. One check will be the lease check and the second check will be the down payment assistance program check that you’re providing for them.

And this down payment assistance program check is also non-refundable. So, if they default, then they do not get that money back. If they do not exercise their option to buy, then they do not get that money back. It is non-refundable, just like the non-refundable option fee.

And believe me, I’ve had people that have paid in upwards of $400 a month in addition to the lease payment for over a year and then they’ve walked away for one reason or another.

So, here’s a way for you to establish additional income streams for your real estate portfolios that is simply free money if you ask for it. It’s a great program for the tenant buyer if they utilize it. If they don’t utilize it, it’s no real loss to them, but it’s a way that they could potentially be paying in more money, you could be getting additional cash flow and it’s a win/win all the way around. And it’s a great cash flow boost generator for your business as well.

So, try to incorporate a down payment assistance program into your lease option business if you feel that is appropriate for you.

There are numerous ways to make win-win situations for lease option buyers and yourself as the investor.  Let me share with you all the potential programs you can offer.

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