|
Beginners Real Estate Investing Guide
Real Estate Investing - Ask
Questions Before Making an Investment
First Time Real Estate
Investor
Real Estate Investing - Planning
Your Investment Strategy
How to Find Real Estate
Investment Properties
Getting a Professional Home
Inspection
Large Profits From Inexpensive
Real Estate Repairs
Real Estate Investing - Costs
and Fees
Real Estate Insurance
and Risk Management
Real Estate Investment Risk
Part 1
Real Estate Investment Risk
Part 2
Getting The Best Return For
Your Investment
Creative Financing
For Real Estate Investors
Real Estate Investment Tax
Considerations
Real Estate Rental Properties
- Great Investment or Nightmare
Real Estate Foreclosures - Great
Deal or Headache
Flipping Real Estate for Profits
Slow Return On Real Estate
Investments
Negotiating for the Best Possible Real Estate
Deals
Real Estate - A Time to Buy and a Time
to Sell
Creating Your Real Estate
Investment Strategy
Investing and Growing
Your Real Estate Portfolio
Commercial Real Estate
Investing
Real Estate Marketing
Understanding Real Estate Law
Do You Need An Real Estate Agent?
What The Real Estate Mortgage
Lender Sees
Do You Have A Career In Real
Estate?
Rural or Urban Real Estate
Investments?
Real Estate Investing on the
Internet
Real Estate Investing
- Property or Paper? |
Real Estate Investing - Introduction
Using Lease Options to Purchase Real Estate
Renting out investment property is very common. It's been going on for as
long as houses have existed, for the most part! It has certainly been going
on longer than there have been courses teaching one how to acquire and rent
out investment property!
So, what is the big deal about lease options now? It makes rental investment
property easier to acquire - that's what!
Lease options are becoming more popular because they don't require any money
down, or it only requires a small down payment. To acquire such an investment
property, you would work directly with the current owner/seller of the home.
No banks or mortgage companies are involved, and there are no credit checks
involved either.
Note that not all sellers will be open to this type of deal, so it is important
that the seller is motivated to sell to make this work. Start by offering
their asking price. They will get many insulting offers - don't be one of
them. Note that motivation exists because of another situation - such as
divorce, loss of a job, a need to move to another state or city, or something
of this nature. They don't just want to sell the property, they need to sell
the property - quickly in cases such as this.
You must work to make sure that your seller feels that they've gotten a good
deal. When the seller feels that they are getting as much, or more than the
buyer out of the deal, the buyer often finds that they come out better in
the long run.
Start by finding out why the seller needs to sell. This gives you a better
idea as to what you should be offering. Certain personal situations entice
sellers to sell at very nice prices. Of course, regarless of the price, you
must also note the overall condition of the home. Obviously, you can't offer
the market value of the home if there are numerous repairs that are needed.
Cosmetic damage, on the other hand, is cheaper to repair than structural
damage - keep this in mind.
For instance, if a new roof is needed on the home, this will cost you a great
deal of money - and it is a bargaining tool in the price negotiation. But
if the house just needs a fresh coat of paint, this can also get you a lower
price, meaning that you win by being able to make cosmetic changes very cheaply.
Have a professional home inspection done, and then find the appropriate
professionals that will be needed to make those repairs and get estimates
- before you enter into any deal. Have everything put into writing, and give
the seller a copy. This is a good way to get the seller to drop his price,
in accordance with the repairs that must be made. The seller may also opt
to have the repairs made, without dropping the price of the property. Either
way benefits you.
With that said, let's take a closer look at how to work out lease options.
When you purchase on lease option, you are again searching for sellers that
are working without a real estate agent. You will be buying the property
on a land contract, or on a contract for deed. One of these two contract
types are always used when the property is being sold between two individuals,
as opposed to one or both individuals having a real estate agent.
Simply hire a real estate attorney to write out the contract for you. The
cost of the attorney can be split between the two parties. If a lease option
is offered by the seller instead, don't take it! If you agree to a lease
option, you are renting the property - you don't own it.
Why don't you want to rent the property? Because if the owner decides he
wants you out, he can easily go to court and have you evicted. On the other
hand, if there is a contract, and you are the owner of the property - more
or less - the seller then has to go through a judicial forecloseure process
to get you out, which costs about $10,000, and can take up to a year to prcess.
Obviously, you aren't going to try to cheat your seller, but this protects
you if you can't make the mortgage payments for some reason. In this event,
you do have additional time to make good on the contract, since it takes
so long for the legal process of removing you from the property to finish.
It is for these same reasons that as a seller, you would want to try to get
the buyer to agree to a lease option first. If the potential buyer wants
the option as well, you would ideally have a lease contract, with a separate
option contract. This way, if a problem arose, you would have an advantage
in the court system, because of the lease agreement.
To make this work in your favor, make sure that the option contract states
that it is not binding unless the terms of the leases agreement are met.
In the options contract, it should be stated, throughout, that the lease
agreement takes precendence in all proceedings. Set the lease agreement for
a term of about 24 to 36 months. If the potential buyer moves out before
that term has expired, the option contract should be voided. It can also
be voided if the potential buyer is late on rental payments.
By doing this, you are protecting yourself, and the property. If the potential
buyer does not adhere to the lease agreement, you can do a simple eviction,
as opposed to an expensive judicial foreclosure. An eviction usually takes
as little as forty five days.
The contract should also clarify the selling price, stating that the selling
price will be set at the market value of the property at the time of the
sale, not at the time the contract was signed. You may also want to make
it clear that the potential buyer cannot lease the property out to another
party before he or she actually buys the property.
When the lease contract terms are met, it is time to offer the leasor the
opportunity to purchase the property. They will naturally have to get qualified
for financing first, in order to pay the sales price. You cannot owner finance,
as you still need to finish fulfilling your contract with the original seller
of the property.
You may have to entice your buyer. They should know that the price of the
house is set at the current market value, but you could offer them a discount
for being good tenants in the past, if you choose to do so, or if you need
to do so in order to help the deal to go through.
Make absolutely sure that you work with a real estate attorney when it comes
to lease options. It costs money to do this, but in the long run, it will
help you to save money - and trouble.
• More
Articles
|
Beginners Real Estate Investing Articles
How to Advertise a Rental
Property
How to Build Equity
in any Real Estate Market
How to Find Motivated
Sellers
Developing a Profitable Real
Estate Investing Strategy
Bird Dogging: Getting Started in
Real Estate Investing
Buying Your First Home
Using Lease Options to Purchase Real
Estate
Real Estate Foreclosures
Increase Your Net Worth Through
Real Estate Investing
Interest Only Mortgages
Real Estate Investing
No Money Down Real Estate
Investing
The Power of the Lease Option
Real Estate Investing Tips
Real Estate Investments
Refinancing Your Mortgage
Loan
Paying Your Mortgage
Selling Your House without a
Realtor
"Subject To" Real Estate
Financing
Using Trusts as a Real Estate
Alternative
Search for Beginners Real Estate Investing Information
|
