Real Estate Profits

Do you want to start investing in real estate but you don’t have much money? Is your credit such that you can’t borrow any money? The answer to these questions can be simple. By using a lease option you can start investing today.

Lease option is the short term for lease with option to purchase. Other names for it are rent to own, rent to purchase, lease to own, lease to purchase and others. What all of these mean is that a person is leasing or renting a property and paying a fee to have the exclusive right to purchase within a certain time frame.

The way a lease option works is you find a property whose owner is willing to lease now and sell later, sign a lease agreement for an agreed upon length of time and pay a fee for an option to buy the property within an agreed upon time.. If you can’t or don’t want to buy it then you forfeit your option fee and any rights to remain in the property.

The lease option has a number of good things for both the buyer and the seller which makes it an ideal investment vehicle. It’s a great way for even someone with less than perfect credit and not much money to become a successful real estate investor.

The hardest part about investing with a lease option is finding a suitable property. The main problem is that property owners don’t understand how a lease option works and many aren’t willing to learn. Some think you are trying to take advantage of them so will refuse to consider a lease option.

Another problem is finding a property that makes sense. In today’s real estate market most properties, whose owners would consider a lease option, have more debt against them than they are worth. The payments are also higher than what can be collected for rent so it isn’t a good deal for the owner. If it’s not a win win situation you had better just walk away and keep looking.

Some of the benefits for a prospective real estate investor using a lease option are:

1. Normally the option fee is a relatively small amount that’s negotiated between the owner and prospective buyer.

2. The option fee doesn’t have to be cash. It can be labor, services, vehicles or just about anything of value.

3. Credit doesn’t have to be perfect. The buyer will have the time during the option period to work on it.

4. Time to work on other issues to get a loan, such as down payment, time on the job, rental history, etc.

5. Its possible to negotiate a credit from the lease payments to apply to down payment or toward the sales price.

6. Doesn’t have to complete the purchase, but will forfeit option fee, any improvement to the property and credits.

7. Can treat the property as your own and possibly make improvements with owners consent.

8. The owner can’t sell the property to anyone else as long all the conditions of the contracts are met.

9. Put wording in the contract to be able to sell the option or put a renter or future buyer in the property.

10. Put a sub-lessee in the property at a higher rent amount than you are paying

11. Can take control of the property as soon as the agreements are signed, no long wait to close.

With all of these benefits it looks like the investor is getting the better part of the deal but not so as we’ll see from the owner’s benefits below:

1. The sales price is usually at or even a little over market value depending on the economy.

2. The owner knows he has a sale in the future.

3. Lease payment is usually higher than market rent. The owner can use it or credit in return for on time payments.

4. The owner gets a tax free option fee that he can use immediately along with the increased rent amount.

5. The owner knows the property will be cared for as the tenant is going to buy it.

6. The tenant usually pays for repairs up to agreed on amount such as $200.

7. Basically the owner can now walk away from the property without worrying about it.

As you can see this is a winning situation for both the owner and prospective buyer. When you approach an owner use the above benefits to show him what a good deal a lease option would be for him.

Lease options are great because you can control as many as 10 properties with the same amount of money you would have to use as a down payment on just one. Instead of spending time saving for a down payment and possibly having to work on credit issues you can begin investing tomorrow. All it takes is a newspaper or computer, a telephone and the information you’ll find in this and other articles here in my blog.

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Tags: lease option, lease option benefits, lease option investing, lease with option to purchase, option fee

This entry was posted on Thursday, November 13th, 2008 at 9:17 pm and is filed under Probate, lease option. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.