Real Estate Investing - Introduction
The Power of the Lease Option
The lease option is a great form of real estate investment. Even the most
famous real estate tycoons, such as Donald Trump, use lease options, and
there are many reasons why they do. In fact, there are several million and
billion reasons why they use lease option if you look at their bank
accounts.
When you control a property with the lease option, you have the right to
all, or at the very least, some, of any appreciation during the course of
the lease option. Obviously, the longer the term of the lease option is,
the more you can realize from the appreciation. With single family homes,
lease option terms typically run from one to two years. If you are the buyer,
that appreciation really counts. If the market appreciated by 3%, and the
property is valued at $100,000, that is an annual appreciation earnings of
$6000.
It is easier to build up equity with a lease option. You can typically pay
a specified portion of your rent each month to the purchase price of the
home. What this does is it lessens the amount of money that is owed on the
property, while the value of the property remains the same or rises. The
difference between those two prices is your equity.
Typically, when the renter takes their option to purchase the property, and
starts the process for buying the home, they do not have to acquire a new
loan. There is also no additional closing costs involved. This saves a great
deal of time, effort, and money.
It gets even better than that. With a lease option, you don't necessarily
have to put down a downpayment. All you need to do is find a motivated seller.
Offer a lease option, and everybody is happy. They may not even realize that
option fees are standard.
Overall, lease options benefit all parties in the agreement. The seller is
happy, the buyer is happy, and even the mortgage lender is happy. The amount
of profit to be made from lease options is astounding, and it's a way to
quickly get into real estate investing, with little or no money.
Lease options make money no matter what the real estate market is doing.
A lease option consists of two contracts: The lease contract, and the option
contract. Ideally, your real estate attorney will have the option contract
set to be cancelled in the event that the lease terms are not met. This way,
if the person that is buying a property that you own - or that you have a
lease option on with the original ower, doesn't pay their rent, you can easily
evict them and start over, without losing any money.
• More
Articles
|
