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.