| LEASES OPTIONS RICHES | | | | agreed to pay and what the home is worth after the |
| Another very popular real estate investing technique | | | | 3-5 year lease period. This could be 20-50 thousand |
| used by savvy investors is Lease Options or Rent to | | | | or more in some areas.) |
| Own as it is sometimes known by. A lease option has | | | | For selling, this is also one of my favorites to use. |
| been very valuable in my real estate investment | | | | When a real estate market starts to slow down |
| toolbox. I use this technique to purchase real estate, | | | | because of foreclosures, too many new homes being |
| and also in a slow real estate market to sell property, | | | | built nearby or economic downturns, you have to be |
| while still getting the full asking price. | | | | creative when selling your property, if you want to |
| WHAT IS A LEASE OPTION? | | | | get it sold. |
| There's no mystery here. It is what it sounds like, | | | | If you are trying to sell your property and you have |
| two separate methods combined into one. | | | | tons of competing sellers in close proximity, you're |
| You have the lease, which is a bilateral agreement | | | | going to have a difficult time selling your home unless |
| binding two parties contractually to perform specific | | | | you drop the price really low. But, if you have a |
| actions. One party agrees to pay money in exchange | | | | mortgage on the home, you probably can't drop the |
| for access to a property. The other part agrees to | | | | price too low, right? So, what do you do? One way |
| let or lease the property to the first party in | | | | to sell a home in a slow market is to lease option it. |
| exchange for a certain amount of money in set | | | | Now in order to do this effectively you have to be in |
| periods. | | | | a position where you don't necessarily need all of |
| The option is a unilateral agreement binding the seller | | | | your equity out right now. If you can afford to wait |
| to selling a property to you exclusively, for a | | | | a short time to get cashed out then this technique |
| predetermined price, but at a later date sometime in | | | | will work for you. You can still get your full asking |
| the future. | | | | price without discounting like your competing sellers |
| HOW DO WE USE THIS TECHNIQUE? | | | | will. |
| For buying, this technique works extremely well. I | | | | I will lease option to someone for a term of 1 to 2 |
| have targeted investment property that I want to | | | | years, with a minimum of 3 to 5% down. After the |
| buy, but I don't want to get a mortgage on the | | | | term is up or during, they have to exercise their |
| property. So I ask the seller to lease option it to me | | | | option to purchase or face eviction at the end of the |
| for 5 years. This means that I will be responsible for | | | | term and lose the 3 to 5% that they initially gave me |
| making monthly lease payments on the property, but | | | | to move in, that money is always nonrefundable and |
| unlike a rental, anytime during or at the end of the | | | | is mine to keep. |
| rental period of 5 years, the seller has to sell the | | | | But, if they go through with the purchase, I get my |
| property to me. But, I don't have to buy it, if I don't | | | | full asking price, where my neighbor took a big hit |
| want to. | | | | because he discounted his property in order to sell 1 |
| You maybe asking yourself, what's the point, but just | | | | to 2 years earlier. Plus, he probably paid another 5 to |
| think if you knew that the property was going to | | | | 7% in realtor fees, where I did not because I didn't |
| appreciate 15 to 20% over the next 5 years, and | | | | need a realtor to find me a buyer. There is NO |
| you could then sell the property and make 50 | | | | shortage of people looking for a seller who is willing |
| thousand dollars by selling it to someone else, without | | | | to sell on installments or seller financing methods. |
| ever owning it. Yea, I thought that would get your | | | | Before you try to buy or sell real estate on lease |
| attention. This is a real scenario. | | | | option terms, I recommend getting detailed |
| MAKE MONEY AS A MIDDLEMAN | | | | step-by-step instructions, buyer and seller favorable |
| (You can also use this technique to middleman deals | | | | contracts to protect your interest in the transaction. |
| and make 20 to 50 thousand on each transaction. | | | | The worst thing you can do is give a buyer equitable |
| Use a lease option to tie up a property, find a tenant | | | | title. This is where if the buyer defaults and stops |
| buyer, make them give you option money to move | | | | making payments to you, instead of you simply |
| in. (3-5% down, you may have paid 1-2% to get the | | | | evicting them, you go to court and find out that you |
| home) Then charge them a couple hundred dollars | | | | can't because you have unknowingly given them |
| over and above what you have to pay to the seller, | | | | equity in your house and now you need to foreclose |
| then at the end of the term, they buy the house | | | | on them in order to get them out of the house. BE |
| and you keep what's between the price that you | | | | CAREFUL! |