http://www.REIClub.com – Lease Options Are a Great Way to Invest in Real Estate. Watch This Video to Learn What a Lease Option Is and When It Makes Sense to Lease Properties With an Option to Buy.
To Learn More About Lease Options:
1. What is a Lease Option:
* A “lease option” is really two separate but related agreements: a “lease agreement” and an “option agreement”.
* Lease Agreement – standard agreement to rent a home, sets terms of lease
* Option Agreement – the right to purchase the home within a specified period of time for a fixed purchase price
* Unilateral agreement – Seller is obligated to sell, buyer not obligated to buy
* rent credits (?) – portion of each month’s rent is credited towards the sales price, small percentage of monthly rent
* option consideration – upfront fee paid by tenant buyer to the seller that gives the tenant buyer the option to buy at a fixed priced during a certain period of time
* sandwich lease –
* assignment – “assign” the option over to another investor for a fee, they resume payments and ownership of the contract and property at time of closing/ending of option period.
* sublease – you are the primary on the contract to purchase, but lease the property to a different tenant, responsibility is still yours.
3. Why lease options?
* Move property faster – buyers market = competition
* Good way to sell when market is down
* Pass small repairs onto buyer
* Tenant Buyer – better maintenance of home, intention to buy
* Appreciation – fixed price
* Repair Credit
* Little cash upfront vs. Buying upfront
* Not Obligated to buy when market changes
* Hard time qualifying for loans
* No taxes, less liability: Don’t own the home (yet), don’t have to pay property taxes and your liability is reduced.
* 12 months with the right to renew annually 3-5 years
* Not locked in – reduce risk
* Multiple ways to profit – upfront fee, monthly rent (sublease), sale, assignment
o What you charge vs. what you pay
o Assignments – legal advice – more risk
* Participate in market appreciation
Lease options are a great real estate investing strategy for sellers, buyers, and investors. Including this strategy in your arsenal of real estate tactics will make you a stronger more educated investor. Most importantly, what can make or break a good lease option is the agreement, so my advice to you is to be certain that you fully understand the terms of the lease option agreement before signing any agreement.
Again, this is Frank Chen with REIClub.com. Please take the time to leave your comments for this video below and please subscribe to our YouTube channel so you’ll be automatically notified when we upload more quick video tips for you. Take care and good investing.