By Bob Davis

What you missed May 2007 Meeting
by Robert Davis

Jack Shea is a local seasoned investor who has been very successful using lease option techniques.  He talked about how we can make money as well as protect ourselves in both a down market and an up market by using the lease/option technique.  Currently, he believes the housing prices will continue to decrease, perhaps for a couple years.  This is why his method of controlling properties via the lease/option seems to be a much smarter way to do business.

He pointed out some of the advantages of using the lease/option to control properties. The seller has the benefits of getting payments for the property, no maintenance costs, no management problems, and a possible future sale.  The buyer has benefits as well.  There is a lower risk of losing any large sum of money with a lease/option. If we buy a property and the market goes down, we are upside down on our investment. That is to say, we would owe more on the property than it is worth.  With an option, we win either way.  If the price goes down, we simply don’t exercise our option or renegotiate with the seller.  If the price goes up, we have the option to buy it and hold it or flip it for a profit.  Some other benefits are tax advantages, ability to 1031 exchange out if we want to. We usually we get below market cost of funds, and we often get a credit deducted from our purchase price. Additionally, we often get the buy-down of the principal on the mortgage with each mortgage payment the seller makes. Jack also pointed out judgments cannot attach to an option because it is just a future interest in a property.

Now may be the time to learn how to do lease/option deals.  In the past few years, they may not have worked because buyers could always find a seller eager to buy and could easily qualify for a loan. Additionally, many ARM type loans were made to folks who could barely afford the lower interest rate. Now we have seen huge increases in property taxes, insurance rates, and interest rate adjustments take a toll on those who could just get by before.  So we as investors need to find a new tool to do the job.  Jack started his talk with a modified quote, ‘A person who needs a new investment tool and has not yet acquired it, is already paying for it.’  This is why after several years; Jack decided to give the Lease/Option seminar again.   The event is on May 5th. To register, call 813-287-1515, or go to www.sreia.com for a signup form.

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