Understanding Lease Options With John Jackson
Episode 541: Understanding Lease Options With John Jackson
There’s a lot to learn about housing and the real estate industry. John Jackson has been referred to as the King of Lease Options by other educators, speakers, and investors. In this episode, he proves why he was given the title. He has transformed techniques, methods, and structures utilized today with lease options! In 2003, he started his real estate company, Leasing to Buy, and he offers training, boot camp, and different programs to educate people. Listen and have a glimpse of John’s wisdom and expertise in lease options.
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I have John Jackson here. We’ve been friends for a long time. We were heading down to the ranch and we met at places all over the country. He is a formidable force in the lease option department. Everybody needs to develop that one niche and that’s what John has done. His niche is lease options. How long have you been doing this, John? How are you doing?
It’s good to see you, Mitch. First of all, I got to say that introduction sucks pond water from a duck’s ass. I thought there would be music, flames or something powerful where I would drop from the ceiling. That was like Mitch in a closet talking about me. I thought that would be something more exciting, but moving along, this is going to be a great episode. I have been doing lease options for many years. The reason I focused on lease options, to begin with, is that it didn’t involve any capital, no money, no risk.
I didn’t have to fix a house or anything like that. I was simply locking up a nice property with a contract and assigning that contract. It didn’t involve any money, risk, estimating repairs or anything like that. There’s a saying that goes, “The riches are in the niches.” In your case, your main niche is owner financing. You’re buying inexpensive houses and turning them around through owner financing. That’s your niche. My niche is lease options. That’s what I’ve done and I started training people in 2008 or 2009.
You said something that would appeal to a lot of people out there. You don’t need a lot of money to do this.
When I started, I spent $97 on a course. It was the most basic course you could ever imagine. The website is still there. You’re going to think I’m joking. It’s Naked-Investor.com. Michael Carbonare out of Florida was teaching lease options. I bought his course for $97. As far as doing a deal, I spent $68 on a sign to put in the yard. It was aluminum and ugly. The point was I didn’t have to make payments on the house. I didn’t have to buy the house. I wasn’t fixing up the house, doing any repairs or anything. I was simply putting the lease option together, tying up the contract and putting my sign in the yard, and then someone drove by and said, “I want that house.”
You’re dealing pretty houses. A lot of people are under the impression that when you start in the business and you’ve got to wholesale, you have to deal with ugly houses. How does it work? How are you able to go on and get pretty houses with no money?
The way it works is you’re simply tying them up with a contract. Let me back up a little bit, Mitch. ln real estate, when it comes to sellers, there are different levels of desperation. It starts with for sale by owner, for rent by owner, MLS, and houses that are for lease. You could then jump down to wholesale, subject to, foreclosure and short sale. We are dealing with the top four levels, people that are for sale by owner, a lot of times. They had tried to sell the house for a month or maybe two months and it’s just sitting there. We are the plan-B.
We’re not working with homeowners that are desperate to get out of this house and sell for $0.40 or $0.50 of the dollar. We’re simply the plan-B for homeowners that have had their house in the market for 1, 2 or 3 months, or even for rent by the owner. Anybody that has their house for rent by owner is going to fall pretty much into 1 of 2 categories. Either an investor, whom we work with or an accidental landlord. We can work with them.
Either way for them, that’s low-hanging fruit as well. We will work with for sale or rent by the owner. We work with houses that are listed. As a matter of fact, before this interview, I was pulling a list of houses that were listed on the market for over 30 days in the Houston area. That is over 2,200 people that are about to get a piece of direct mail from me.
You said a term that I thought was interesting. Was it an unintended landlord or an accidental landlord?
It’s an accidental landlord. If you got a rent by the owner, it’s either an investor that has rental properties and they are renting out their houses or it’s someone that had tried to sell the house, couldn’t sell it, and they have to move on. When the house doesn’t sell, what do you do with it? You stick a “For rent” sign in the yard. They are an accidental landlord. They didn’t mean to become a landlord. Landlording is not their shtick. We come in and say, “I saw your house is for rent. Would you consider selling on a lease-purchase?”
If they say no, then we say, “You’re an investor” and we shut up. If they say, “Yeah, I’m an investor?” “Great, are you buying more houses because I get houses all the time that you may be interested in?” I’m pressuring them to see where they are. If it’s for rent by the owner and I say, “Would you consider a lease-purchase instead of renting to God knows who?” If they go, “I’m not interested in that.” I would say, “Are you an investor?” I shut up and they go, “No.” I got them. It was an accidental landlord.
For accidental landlords, it’s not their shtick. They are probably getting worn out by the tenants because they didn’t know the right person to put it in the first place. Heaven forbid, they have put in a family member.
That makes Thanksgiving a little uncomfortable. It’s like, “Could you please pass the mashed potatoes, Sally? How is that rent payment coming?”
John has a lot of free stuff on his website. He’s got free training going on out there. I want everyone to go to 1000Houses.com/jjackson. A lot of people think you got to start off with an inexpensive house. What are the average price ranges of the house you’re dealing?
The houses that we are working with typically are above $200,000. It depends on the area. We do houses across the United States and my students do. Here in Texas, the average house we do is about $325,000 because that’s about the average in most places that we’re working with. For a $325,000 or a $350,000 house, these are nice and pretty move-in ready houses. The owner simply needs a plan B. Whereas wholesaling it’s totally different. You’re working with typically ugly torn-down houses. I’m on all these email lists from these wholesalers. I see these houses they were selling and I’m so thankful that I don’t do that.Lease options don't involve any capital. No money means no risk. Click To Tweet
I have no desire to try to wholesale a $30,000 crap box in the middle of nowhere. First of all, I had to spend all that money on marketing to get that lead, negotiate with that seller, and try to estimate repairs then market it. I don’t have time for that. Whereas with us, nobody else is targeting these sellers. Nobody else is targeting the for sale by owners the way we are, or the list of houses that have some age on them the way that we are, or the expired listings the way that we are. We’re the only ones marketing them so there’s no competition. We don’t have to estimate repairs and negotiate the price. The owner is going to get, for the most part, what they are asking for the house.
Give us a case study or some deals that you did. Outline a typical lease option deal that you’re happy with.
With the lease option assignment, which I specialize in, it’s a one-time payday. You get paid on the assignment like a wholesale deal when you assigned that. For example, I had a house down near Austin. It was not too far from Kenyon Lake. It was $425,000. I don’t remember what the owner was asking. I think it’s about $420,000 or $415,000. We set our option price a little bit higher than what the owner was asking. We get paid an option fee that goes towards the purchase of the house.
On that one, it was $425,000. The student did almost $25,000 assignment fee on that and had it for less than three weeks. Nobody was marketing to this homeowner that had his house on the market for almost three months. My student marketed it to him, locked it up with a contract, marketed that house and contract, and got a buyer within three weeks. I think it’s $25,000 down. The buyer couldn’t sell and buy. He put them together and close the deal.
The financing was subject to. Did you do a subject-to deal on that?
No, we’re not taking the house subject-to. There’s no transfer of title with the lease option assignment. We’re simply locking up the house with the lease option contract. There’s no transfer of title between our company and the seller. We market that to the end buyer who typically needs a little bit of time to get financed. We’re not locking up the house with the subject-to. What happens is the buyer, within twelve months, will get financed and cash the seller out.
You get paid to assign the lease to someone. They move in and are exercising the least, but they’ve got so much time to refi and get the owner of the house taken care of. There are plans that you use when you have money. There are also plans and strategies that you can use when you don’t have money, which is where I started out. Did you have a bunch of money when you started out?
No, I’m telling you I spent $68 on a sign plus $97, so there you go.
Almost everybody starts out broke in this business. You have to use strategies that will allow you to navigate and make some real money with not a lot of money out of your pocket because you don’t have any. If that fits you, maybe you need to go to 1000Houses.com/jjackson. Check out his free training. John gives away a lot of free stuff. I do too at 1000Houses.com. Do you get chastised for that? Some people chastised me, “You’re giving everything away.”
I gave away a lot of stuff I give away. The only thing I do not give away, I never have and never will, are my seventeen-page lease option contracts. They cost me over $30,000 in legal fees and through different law firms. They have been drafted for Texas and different states. That’s the only thing I don’t give away. I give away my seller price sheets, my lease option calculator, and all kinds of documents that I use every day.
There’s enough from John to know a good amount about what’s going on. It’s always best to get a coach or something when you decide that’s exactly what you want to do. You’re going to learn one way or the other area. You’re either going to pay the street or pay a guy that knows. You can measure a good coach by what he makes you. You will never be able to measure the coach by how many deals he kept you from losing, how many lawsuits he kept you out of, or how that document can save your ass that he spent $30,000 on.
You don’t have to spend that much money on it because someone has already done it. These documents are live documents half the time. We go around and think we have ironclad documents, then something happens and you go, “How do I stop that from happening?” You’ve got to add something to the document. When you’ve been in the business as many years as John’s been in there, this document has gotten less and less holes in it until finally, we’d like to think we’re bulletproof.
Are we ever bulletproof? You never know but you can go long way down the road to avoid a lot of different things. I know that I spent a ton of money on my contracts with private lenders and with people that are buying my houses. What a blessing to have someone who has already been down the road to do that. It’s not only to get the documents but also to get some quality time, probably have bootcamps. Is it all online that you train?
We’re still old-school. I still like the physical binder. We ship a physical binder to them with the entire operation manual that they can go through. They get online access to videos that would take them step by step. They get all my documents and contracts, no matter what state they live in. They get access to absolutely everything. We even include a certificate for a three-day boot camp. We typically do 2 to 3 three-day boot camps a year. It’s normally in Texas because it’s centrally located.
As a matter of fact, I’m the only person in the US that offers a three-day lease option bootcamp. I can assure you, there is some great music at my bootcamp and some inappropriate jokes. It’s a lot of fun. We do live seller calls there at the bootcamp. The students would bring us their leads and we will call the sellers live. I let everybody hear how those conversations go. It’s a lot of fun.
Those kinds of events with the live calls are educational because you can talk or try to describe them. When you hear it going live, you hear the objections and responses live. Isn’t that what it’s all about? It’s learning all the objections that are possible and learning the answers to those objections so that you don’t have to sound like you’re repeating. You own the response. That’s how you consummate deals. It’s got to be some repetition. You won’t be the best that you ever going to be the first day you get on. You’re going to fall down a couple of times but it’s all in the repetition.If you can copy and paste, you can pretty much do with lease options. Click To Tweet
One of the great things about the lease options versus wholesaling is the conversation is totally different. With a wholesale deal, which I know you buy a lot of houses from wholesalers. First of all, they’re typically cold calling or texting someone that happens to have a piece of property that isn’t even marketed for sale yet. The first thing they have to do is overcome the hurdle of tracking down that property owner. The next hurdle is getting them on the phone. The next hurdle is talking them into at least being interested in selling the property.
Once they got that far, I go, “Great. You’re interested in selling the house finally. Let me beat you down on a price.” I now got that hurdle to overcome. With a lease option, almost everybody who works is already trying to do something with the house, whether it be selling it or renting it. We don’t have all those objections and hurdles to overcome so much. When it comes to talking to sellers, I teach them to simply be the doctor.
When you go to the doctor’s office for some reason, and you go sit in the room there on the exam table, the doctor is not outside the door going, “I hope he doesn’t ask me any tough questions and he’s not rude to me.” He just comes in and says, “Mitch, what’s going on?” You go, “I got this so and so.” You’re telling him where it hurts or what the symptoms are. He’s writing down notes. He will typically tear off this piece of paper, hand it to you and say, “Mitch, here’s your prescription. Take two a day, so and so.”
It’s not the doctor’s job to make you take that prescription or go to CVS. The doctor’s only job is to listen to what’s going on and give his recommendation, “Here’s your prescription.” If we approach sellers like that, it takes off a lot of the anxiety of, “What if they yell at me or I don’t say the right thing?” You’re just listening and having a conversation saying things like, “Do you still live in the house or have you already moved up?” “You have moved out? When did you move out?” “Three weeks ago. It’s been sitting vacant for three weeks.” “Are there pieces of furniture still there?” “No, it’s vacant.” “What are you going to do if the house doesn’t sell in the next couple of weeks?”
You’re writing and taking notes. In my case, typically when I tear off that prescription is for a short-term full-price lease purchase. It’s not my job to make that seller take that prescription. He may not take it at first but more times than not, if a week or two weeks go by and that house hasn’t moved, he’s going to call me back and say, “Tell me about that prescription.”
What do you say to the guys out there that are new and trying to get into the business, and they’re hearing this strategy for the first time, and they have heard a lot of other strategies? What’s your advice to these guys?
It’s different now than it was when I was starting off and you were starting off. Craigslist wasn’t even around back then. They are the same strategies, they’re just more in our face whether it be YouTube or Facebook or whatever. Shiny object syndrome is very easy to succumb to. I would say that the first thing we’ll look at for starting off is what are your comfort levels? What’s your personality like? Is your personality geared more towards some people’s words, “I don’t want to have to negotiate or beat the seller down and I just want to be there to help?” That’s probably a lease option.
Maybe your personality is such that you enjoy the thrill of trying to get that best price, negotiating and haggling. Probably wholesaling is your best option. Maybe your personality is such that you’re a very number-driven analytical, which is not me. Maybe you love spreadsheets and stuff. It’s commercial and multifamily. It’s all those calculations that go into multifamily and commercial outside of cap rate and NOI.
You see a spreadsheet for multifamily property and that’s an analytical genius savant that puts that together. You got to decide what’s your personality like and what’s going to fit your personality. If you despise having to haggle and negotiate with people, then wholesaling is not you. If creating a spreadsheet, plugging in numbers, analyzing and doing deep analytics on a 200-unit apartment complex is not your thing, maybe it’s raising capital or lease options or rehab. Find what your personality aligns with then pursue that.
Tell us about all this free stuff that people can get their hands on. If they go over to 1000Houses.com/jjackson, what can they expect to find over there? What free stuff are you handing out?
First of all, I’ve got free training that’s about an hour and fifteen minutes long. It dives pretty deep into lease options, where to find the sellers, different ways we market to the sellers, how to find the buyers, and how it all comes together. They are also going to get pre-drafted emails. These are the exact emails that I copy and paste and send to sellers. I’ve got this down to a copy-paste structure. Anybody reading this, if you can copy and paste, you can pretty much do what I’m talking about here with lease options.
They are going to get my copy-paste emails, the attachments that I send with those emails, my price sheet, my comparison sheet, and my lease option calculator that makes it so easy to calculate the numbers on a lease option. You plugin what the seller is asking and it spits out the numbers for you. I’m going to give you all that stuff. There may be even a couple of risque photos of me.
I appreciate you taking the time to be on. You always deliver value. You’re very entertaining. Whenever you’re in San Antonio, I like to stop by and see you because you never know. John Jackson is not very politically correct ever. It’s always fun. You make learning and the conversation fun. It’s always a good time.
I would like to thank Livecomm.com for sponsoring this episode. There’s a reason why I have four days on the market. You can check out Livecomm.com, watch the videos on the homepage, and see how the last 200 houses I put up for sale lasted about four days on the market before I got a contract. Check it out, Livecomm.com. We’ll talk to you soon. John, thanks for being on.
- Webinar 1000Houses.com/jjackson
- Tax Free Future 1000Houses.com/tff
- Get a Perfect VA 1000Houses.com/VAHelp
- Mitch’s Coaching 1000Houses.com/coaching
- Main Event Training 1000Houses.com/aof
About John Jackson
John Jackson has been referred to as the “King of Lease Options” by other educators, speakers and investors across the country, and has transformed many of the techniques, methods, and structure utilized today with lease options.
John started his real estate company Leasing to Buy in 2003 and since then, has completed well over 800 lease option transactions himself, not including the countless hundreds and hundreds that his students have completed.
His company Leasing to Buy, has refined the way that lease option transactions are structured and executed, so that over 98% of his buyers obtain permanent financing within 12 months. That is unheard of in the industry, where the industry average is less than 20% of buyers in a lease option ever obtain permanent financing at all!
As an educator, John is the ONLY educator in the US to teach Texas lease options, and the unique laws that Texas has. Real estate attorneys have even referred to John for his education, experience and expertise in this very specific field.
Other nationally recognized educators have learned lease options directly from John, and many also direct their students to John to learn his unique method for executing lease options.
John teaches investors how to make money utilizing lease options using no credit, no money, no risk, and with almost no competition, all while working exclusively on pretty houses in pretty neighborhoods.
John has been featured on NBC, FOX, as well as co-authored “Real Estate Rock Stars” which hit #1 on Amazon in 3 categories and in 2021 launched the first ever podcast devoted exclusively to the topic of lease options titled “The Lease Option Experience”.
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