Joe Bodek is born and raised outside of Philadelphia, PA. After his grandfather and father, he is a third-generation real estate entrepreneur. He received the guidance of his father, one of the largest developers and builders in the country at that time. He continued in the real estate business up until 2012.
After that, he became a mentor because he wanted to solve other people’s problems and share his knowledge of real estate. He created a revolutionary mentoring system called the ‘Earn While You Learn Lease Option Mentoring Program.’ The most important factor of this program is that it costs a whole lot less money in comparison to other courses in the market. This course is for everyone who is facing financial problems but are eager to take real estate courses and make a living out of it.
Episode Highlights:
- Joe Bodek’s Family History And How He Became An Investor
- Leasing A House
- Types Of Lease Options: Sandwich And Wholesale
- Mastering Lease Options In Commercial Properties
- Future Goals Of Joe Bodek
- How He Became A Real Estate Mentor.
Connect with Joe:
Website: realestatementoringUSA.com
Email: JBODEK1@gmail.com
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TRANSCRIPTION
Intro: Hey guys, today I’m excited to talk about a subject that many people always ask me about. And to talk about that subject, I’m going to host Joe Bodek. Joe is a lease option mentor. And despite the fact that it has to do a lot with residential real estate, I think it’s a super interesting subject nonetheless. And you could also apply these powerful techniques in commercial real estate, in what would be known as a master lease option. So, let’s start and don’t forget to check us out at DonandEden.com and remember you can always shoot us an email at Hello@Donaneden.com.
Lady: Welcome to the commercial real estate investing podcast with Don and Eden, where we cover all aspects of real estate investing with special attention to off-market strategies.
Don: Hey, Joe, how are you doing today? Welcome to the show.
Joe: Oh, good, Don, how are you? I appreciate you having me on.
Don: Yes, of course. I think it’s important to have somebody like you because you’re dealing with lease options, which is a very interesting subject, and I haven’t had anybody in the show that is doing that up until now. So, I would like to hear everything there is to know about it. And I’m sure that the audience would appreciate that as well. But first of all, I want you to tell us a little bit about yourself and your background and how you got into real estate, to begin with.
Joe: Don, I’m not the usual story that you hear about the individual that was working in the cubicle, hated his job, hated his boss, saw the infomercial at three o’clock in the morning and went and signed up for it, got into real estate and of course, the rest is history. You hear that a lot out there these days. I’m not of that area. I was birthed into real estate. I’m the third generation. My grandfather was a developer, builder. My father was one of the biggest developers and builders in the country back in the 50s and 60s and early 70s. By way of explanation, if anybody lives in that split level, or knows what a split-level home is, my dad’s want to make them famous. He claims he invented them. I’m not quite sure he did that but he made it kind of famous, he’s got thousands of them. So, I was mentored by him for a number of years, work with him running about 3000 apartment units for him and learn to build houses and develop ground. So, I have a fairly decent background in conventional real estate. And then back in the 80s, he decided he wanted to retire, everything got sold off. And I went out on my own eventually got into creative real estate, dealing with wholesaling and lease options and subject to and those kinds of deals, and did that for about 25 years. And for the last, I think it was about 8 or 10 years, I’m not exactly sure, I started mentoring people and found that I was pretty good at coaching. And over the last 8 or 10 years, that’s what I’ve been doing, mentoring and coaching people at least options and wholesaling. And that brings us pretty much up to today.
Don: Wow. So yeah, I got a lot of questions about this story. First of all, I want to say that you’re very lucky to be born into a family that is dealing with real estate because you absorb things from an early age and you understand the potential of that business right on. It’s something that I’m sure you’re grateful for and appreciate right?
Joe: To have my dad is my first mentor was pretty phenomenal. His background was pretty amazing. It gave me a look at both sides of the coin because I got to do conventional real estate which is going out and buying properties and building apartments and all that and go building houses and developing ground. And then they got me the ability to go into creative real estate, which is a lot of fun to do. And of course, you don’t have to work with banks as much and all the stuff that I did it was completely the opposite. I had to relearn real estate when I went into creative real estate because it was the opposite of everything I had learned. So yeah, it’s been a good career. I’ve had a good time at it. I’ve been lucky. I’ve been around a lot of people that knew what they were doing.
Don: Yeah, we started doing creative real estate in the beginning. So that’s how we started and that’s how I feel a lot of people are getting started today. Because today you’re able to start with creative real estate with no money and no knowledge, no college degree, and for me it was perfect. I’m sure it’s very interesting that you got to see all types of real estate during your career. You’re focusing right now in coaching and helping others, which I’m sure is very gratifying, right?
Joe: To be perfectly honest with you, I was getting ready to retire. I had done hundreds and hundreds of deals in the last 25 years, and I’m not a spring chicken anymore. And then, you know, what was I going to do sit around click coupons? That didn’t make much sense to me. And people kept asking me, how do you do a lease option? How do you do this and coaching all these people? And somebody eventually said to me, why don’t you open up a company and do this because you’re pretty good at it. And that’s how it all came about. So, I decided, well, I’m not going to retire, I’m going to keep doing it. And to be perfectly honest with you, I get way more of a thrill at a coach and a student to get them through their first deal or get them to expand their business and get it flying than I ever did build a house.
Don: You know, when you’re in real estate for so long, then the money is no longer the main purpose if you ask for my opinion. I mean, of course, it is the thing I mean, you still want to make money, but it’s not just money, it’s also the impact, it’s also the ability to affect people. And I feel the same when people talk to me about real estate wholesale, which is how I got started in the residential real estate wholesale. The first time you tell people about this, then they go crazy. They don’t believe that you can even do things like that. Lease options are pretty much the same as wholesale. The first time you hear it, it’s kind of hard to grasp, but then you realize how ingenious this is, right?
Joe: A lot of people, as you just said, they’re kind of taken aback when they hear the word lease option. They think it’s very difficult, got to go to night school to learn how to do this type of thing, and it’s not. The best way I can explain it to your listeners would be if they’re familiar with a car lease and how that works. This is the same thing. In a car lease, you go ahead and you lease your car for a period of time, usually it’s three years on a car lease, and at the end of that lease period, you have the opportunity to either go ahead, you have the option to purchase that vehicle, or you can give it back and go get another one from the dealer or go somewhere else and get a car. Same thing here. You’re going to lease property for a period of time, which you’re going to establish with the seller. And then at the end of that lease period, you have the opportunity to go ahead and purchase the house at a predetermined set price, or you can say no, I’m want to move out and go find another place to live. So, the easiest way to look at it is it works just like a car lease, you just substitute a house.
Don: Yeah. But then it gets a little bit trickier because you assign the lease to an end buyer, and you still able to make money on all the ends on the front end, back end, and the rent money. So, let’s talk a little bit about that and how you make money as the investor or the entrepreneur and a lease option.
Joe: Okay, now, first and foremost, there are two types of lease options. We’ll talk about this one first, which is called a sandwich lease option. And then if you’ll permit me after we’ve done that, we can talk about the wholesale lease option. Sandwich lease option has three paydays to it, which is kind of unique. So, what happens is, you’re going to go ahead and you’re going to enter into a lease option agreement with the seller and you have the right at this point, to sublease the property. You are now the tenant of the seller, of the owner. And you have the right to put a tenant in that house and sublease the property. So, what you do is you find a tenant-buyer, a buyer that’s interested in purchasing a house, a tenant-buyer wants to live in it for a little while, and then purchase it at the end of the lease just like a car lease. And what you have at this point is three paydays.
The first Payday is called ‘Option Consideration’. That’s the money that the tenant-buyer gives you upfront before they ever move into the house. That’s called an Option Consideration. And that will go towards the sale price of the property when he settles on it. And that’s nonrefundable. So, if they decide they don’t want to live in the house, they want to move out, they do forfeit that amount that they put down upfront.
The second payday that you have is called the ‘Rent Spread.’ That’s the difference between what you’re paying the seller that you agreed to pay the seller every month, and what you’re going to collect from your tenant buyers. So, if you’re paying the seller $1000 a month and you’re collecting $1500, that $500 goes into your pocket every month.
The third, and that’s ‘Residual Income’, by the way, and if you have a bunch of these properties, let me tell you something that residual income is nice, it comes in every month. The third Payday is backend money. That occurs when you settle on the property a year or so down the road when the buyer goes and buys it title transfers. So, if you had, let’s say, $20,000 in the deal, that’s what the difference between what you were saying you were going to buy the house for, and what you were selling it to the tenant-buyer for. So, let’s say that’s $20,000, just to use a number, and you took $10,000 as that upfront money, which I just alluded to, which is the option consideration that you get upfront. Well, when you go to settlement a year or so down the road, there’s still about $10,000 in the deal. So that’s when you get that backend money when you settle and title transfer. So, you have three paydays with the sandwich lease option and you’re in that deal from beginning to end. That’s why they call it a sandwich because you’re right in the middle between the buyer and the seller.
Don: Before we move on to the wholesaling lease option, I want to ask a few questions about that. When you’re doing an option consideration, so you’re taking the money from the end tenant, the one that you have found, right?
Joe: Right.
Don: Aren’t you doing the same with the original seller? So, doesn’t he want the option consideration as well? And if you are doing this, it’s typically going to be smaller than what you’re asking from the tenant you found, right?
Joe: Yeah, that’s right. It all depends on Don because there are two types of sellers out there. Some people need to sell and people that want to sell. Generally, when you’re dealing with the person that wants to sell, you know, they’re looking to downsize or move closer to their kids or something of that nature. They don’t have any kind of a problem because we’re problem solvers. Most of the people that we deal with can’t get rid of the property conventionally, for some odd reason. We come in and do a lease option if they can’t do it conventionally. So, if you’re dealing with somebody that wants to sell, usually they do want money upfront, and as you say, you’re going to negotiate that, you need to collect more from your tenant-buyer than you have to pay your seller, you’re correct there. However, on the other end of this thing, you have the people that need to sell. These are people that own another house, couldn’t get rid of their house eventually quick enough, they can’t afford to mortgages, you have people that lost their jobs, unfortunately, can’t afford their house, they got to get out of it right now, things, where people have to move quickly and can’t get the property, moved conventionally. Most of these people never asked for upfront money, they want debt relief, they need to get out from under a problem. And in most of those instances, you’re usually just giving them a month’s rent. It’s not a security deposit, but you don’t treat it that way. But you’re giving them a month’s rent or some very low money, maybe a little bit of move out money, something of that nature. So, you don’t run into the upfront money when you’re dealing with people that need to sell it need to get out of the house. They just want to get out from under the problem. But you are correct. You’re going to take less money upfront, then you’re going to collect in your ten and five.
Don: OK, so the other question that I have is how do you find these people that need to sell and aren’t these people are going to look for somebody who’s going to be a cash buyer like in wholesaling? For instance, as a wholesaler, I know that when people need to sell right away, they’ll make a cash offer for a lower price. And that’s where we make money as wholesalers. So why would that seller lease the property to you, instead of just selling it to somebody else for cash? And also, when you find that person, what if the property is distressed, and you need to fix it? So, you got to work with properties that are good, right, that are habitable?
Joe: Great question. Let me answer the first one. These people want to get cash for the property as everyone does okay, that’s a given. However, they run into a couple of problems. One is that there’s not enough equity in the deal for a wholesaler to make it work. Because there’s just not enough money in the deal. If you’re going to do a wholesale deal, it has to be equity rich.
Don: Yeah.
Joe: In order to make it work.
Don: Definitely.
Joe: So that’s one problem they run into. The other problem is that the seller won’t take the low offer that usually offered by the wholesaler because they have to work on a 60 or 50, or whatever it is a percentage to make this work. So, the two reasons that they can’t do a cash deal is the absence of equity, or the seller not taking the low offer. So, these are the type of people that we work with. And the way that you find them is numbers. This is a numbers game.
Don: Yeah.
Joe: So, you know, however, you’re doing your marketing, whether it’s through email or texting, or direct mail, you’re working the numbers to find these individuals. But I will tell you that there are plenty of them out there. There’s an awful lot of properties that not only don’t have enough equity in him, but you can work with underwater properties. When you’re working with lease options, you just have to have a longer lease to make it work so that the equity builds back up in the property. So those are the two reasons that they would work with you on a lease option. They simply can’t do a cash deal.
Don: Okay. So how do you find the end tenant? I mean, you’re looking for a rental, they’re not real estate investors, they have no idea what you’re doing. So to put it on the end of something or Zillow, right?
Joe: Yeah, you’re looking for end-users, you’re not going to deal with cash buyers. When you’re doing lease options, you’re going to have to deal with end-users. You’re correct. And the way you find them is very simple. A Craigslist ad, Zillow, all the different classified sites on the internet and to tell you the truth, the single biggest thing that finds some free is a nice sign ‘Rent to Own’ in front of the house. When we put rent own property available for rent to own or lease option, the phone rings off the hook simply because as you know, I’m sure there’s an awful lot of people out there today that can’t get qualified for a mortgage for one reason or another. They’re good people, but they have a thing on their credit, they got to get cleared up or they don’t have enough money for a down payment. So, a lease option affords them the ability to move into a property that they want to buy and live there while they’re correcting the credit problem or saving the money that they need. So, there’s no lack of people that will call you and you put that when they see that ad.
Don: Interesting. This is when we talk about residential real estate. Now, I know You haven’t done a master lease option, in commercial- but I know you know something about it. So, what do you know about master lease options in commercial properties? And how do you do that?
Joe: A master lease option works just pretty much the same way as a lease option works, again, you know, use your car lease as a guide. And the only difference is that when you’re dealing with a multi-unit property of any sort, your due diligence has to be way, way, way more because you know, you’re dealing with a lot more numbers, a lot more things that affect the property and so forth. So, your due diligence has to be a whole lot more when you’re dealing with a commercial property, as you know because I know you deal with commercial properties. Now, the master lease itself, it’s just got more in it to get all this information that you need about this commercial property in there. But otherwise, it works pretty much the same way.
Don: You lease the property, right, from the owner? So, let’s say it’s a warehouse, or let’s say it’s a self-storage, so you’re going to lease the property, but you got to have the option to sublease the property which a lot of commercial owners don’t like. Because when you lease it, then they would always say that if you want to sublease, then you gotta have the approval in writing of the owner, right? There are ways to get over it. Like I know that there’s a way to get over everything in real estate. And I’m sure the people that are specializing in that they know exactly how to do that.
Joe: I wish I could agree with you, Don. But I don’t do them. I know how they work, I just have never done them. I like working with single families. They’re a lot simpler.
Don: Yeah. So, what are your goals right now, when you have already retired, you’ve made hundreds of deals. What is the goal right now to teach as many people as you can, how to do this right, and how to wholesale also lease options?
Joe: Yeah, and I’ll tell you about wholesale lease options in a second. The goal is pretty simple. What I’ve found out there a lot of people want to learn how their work and creative real estate. The problem was and is and I’m not objecting to this, but if you go out and look for a lot of these coaches out there and look at what they’re charging, it’s a lot of money. I’m not going to say they’re not worth it or whatever, I’m just going to say it’s a lot of money. There’s an awful lot of people who want to learn about this. So, what I did was I purposely set up a program that’s very, very inexpensive. You get my program for less than you ate at the dinner witch your significant other in a movie. And I set it up that way specifically so that I can do what you just mentioned, that I can teach as many people out there that want to learn this as absolutely possible. And I did it because it’s not about the money for me at this point. It’s really about giving back and teaching all these people out there that would like to learn how to do this, but I don’t want them to have to go and remortgage their house to pay the fee. That’s why I set the program up the way I did. And that’s my goal to teach as many people as I possibly can.
Don: That’s amazing, especially because now everybody’s trying to learn. If you’re trying to get into real estate, I know a lot of people would just think about wholesale and residential as the main gateway, because it’s simple, you can start with no money down. So, I see a lot of people that have no education and are coming from distressed families where they didn’t have any food on the table. So, they’re trying to make it in life. And they’re trying to get into real estate wholesale. The problem with that is that when you’re getting into wholesale, there’s a lot of competition. Yeah, I’m a successful wholesaler in Miami, me and my partner. And sometimes I see the things we do. And I think about these people that are getting started, and that they have to compete with us. I’m thinking, well, they got some fierce competition. It’s not just me, it’s a lot of wholesalers here, a lot of strong and smart players that you meet and you know. So, I agree that starting with something like that with the lease option, which I’m sure is that saturated, I just know. I see the market, I see what’s going on, I see how many people are trying to wholesale deals and I don’t hear much about people are trying to do a lease option.
Joe: Lease options are not saturated. As I say, a lot of people seem to think they’re difficult but they’re not and they’re not saturated and you can start there, it doesn’t require any money just like wholesaling. It’s okay if I talk to you about the wholesale lease options too?
Don: Go ahead.
Joe: It is really important here is the wholesale lease option and I’ll tell you why. First and foremost, wholesale lease options work very much like traditional wholesaling, where you get the property under contract and you assign it out to a buyer. The big difference is you’re not working with a cash buyer, you’re working with a usual. One of the things that I teach is that, as a wholesaler you know this I’m sure, you throw away an awful lot of leads to find that deal that you can do.
Don: I was just thinking about that right now. And you said that people that don’t have enough equity right are the people that you work with? I was like okay, just going to talk to my acquisition manager after the show and be like ”Hey, listen, we need to do lease options and that’s what you’re doing from now on” because of I through a bunch of leads just for that, yeah, a hundred percent.
Joe: So, if you like wholesaling okay, you can wholesale lease option pretty much just like that. But here’s the kicker that I like. You guys, wholesalers already have a built-in lead machine because here’s what happens. You’ve got… when I was doing a lot of wholesaling personally, usually around 20, 25 to one and leads to five in the field. Your numbers may be different. Make a long story short, what happens is you have all these leads that you worked hard for, and because there was no equity in the house seller wouldn’t take your loan number, you wind up throwing them in the trash. But with a wholesale lease option, if you know how to do them, you don’t have to do that anymore because you can take properties that don’t have any equity in them and do a wholesale lease option on it. You can take properties that people won’t take your low number because your lease option, you can get pretty close to what the buyer wants, and still make money on the deal. So, you don’t have to worry about making lowball offers. So, you can take these dead leads that you have and you can now use for some of them, not all obviously because you don’t want to deal with junk properties. You had asked me about that before when you’re doing the lease option, you want a nice property in a nice area. You don’t want to have to do repairs on it because you don’t want to fix up somebody else’s house with your money. You know, but some of those leads that you get as a wholesaler are nice houses in decent areas.
Don: Exactly they want a market value.
Joe: Yeah, what you can now do with them is to do a wholesale lease option on them. So, in other words, let’s just suppose that you had out of all the leads you get, you get one a month, you could do a wholesale lease option, one that you would normally have been thrown away. Let’s say you’re throwing away 50 of them, and one of them works out as a lease option. And it’s a $10,000 deal, which it should be, okay? Do your maths, that’s over $100,000 a year that you’ve been thrown in the trash.
Don: And that’s the only consideration you’re not even talking about the rental…
Joe: On a wholesale lease option is only one Pay Day. Now if you sandwich lease option, you’re correct. You can do a sandwich lease option as well. It depends on which way you want to go.
Don: So, give us an example of the wholesale lease option, yeah, so we know more about it.
Joe: Well, a wholesale lease option works just like a wholesale deal. You want to find your seller. You’re going to get the property under a lease option agreement, you’re then going to find your buyer and you’re going to put him into a lease option agreement, okay, between you and the buyer, okay? And then what you do is you assign that agreement that you have with the buyer back to the seller. Now, you could do it, either way, you could take the sellers agreement that you have with the seller and assign it to the tenant-buyer and be done with it. But I like to do it the way I suggest so that you have an equitable interest on both sides of the deal, but nobody can say that you did a fraudulent conversion or something of that nature.
Don: What if the seller doesn’t want to sign it when you assign it to him?
Joe: If he doesn’t want to do it that way, you can do a sandwich lease option, you can do it either way. Most sellers, you don’t have a problem. I’ve never had a problem. Either way, they’re going to still be one to one with the buyers. Would it be between the buyer and the seller, when all is said and done.
Don: When I wholesale properties, my acquisition managers, they go meet the sellers and they tell them that they’re going to buy the property. Are you going to disclose the fact that you’re trying to do a lease option here? Or you’re going to say no, I’m your tenant?
Joe: No, I teach my students full disclosure right upfront. “Hello, Mr. seller. I’m an investor. Here’s what we want to do,” and you tell him everything up front. So, he knows exactly what’s going on. And he’ll make the choice and then you move forward. We don’t have many instances where they don’t want to do it. Because again, most of the people we deal with want to get the debt relief they want to get out from under this house, which was like a perfectly good solution.
Don: So, you go there, actually to the sellers, and you tell them, “Hey, listen, I’m going to lease the property from you and then I’m going to find somebody else to lease the property from me for more money, and that’s my fee.”
Joe: That’s what we tell them. We tell them the exact truth, exactly what we’re going to do and you gotta understand, the majority of the people that we work with are the people that need to sell, they want to get out from under their mortgage, they want to get away from this house for whatever reason and they’re not concerned about how they do it, as long as it’s not going to cost them any money or get them in any trouble. Neither of which happens when you’re doing this properly. Yes, I believe in full disclosure, we tell them exactly what’s going to happen right from the very beginning.
Don: Yeah, so they keep the title to the property and then the money made by the tenant. So, the rent money is paying off the mortgage.
Joe: Yes. So, it’s a win-win for the seller.
Don: Makes sense.
Joe: They’re out from under their problem, their mortgage is being paid down. They don’t have to worry about the property. So, it’s a complete win for them.
Don: That’s just amazing information and I’m so happy that you shared it on the show today. So, let’s say somebody is listening to this episode, and they want to get in touch with you and learn more about that, and your system and your program. How would they do that?
Joe: Well, it’s very easy. They can go to my site, which is realestatementoringUSA.com or my email is JBODEK1@gmail.com.
Don: Awesome. Alright, guys. So, if you want to learn more about lease options, definitely get in touch with Joe. I want to thank you very much for being on the show today and giving us these beautiful insights.
Joe: Thanks, Don. It was a pleasure and I hope everybody got a little something out of it.
Don: All right, you have a great day.
Joe: You do the same.
Lady: Thanks for listening to the real estate investing podcast with Don and Eden. Stay tuned for more episodes. Till next time!
