Without a doubt, buying real estate with lease options is the fastest, easiest, and least expensive way to invest in real estate. Fast because it greatly increases your number of potential buyers. Easy because the buyer isn’t looking to qualify for a mortgage and waiting for a third party. Least expensive for the investor because you take control of the property without the costs of buying it.
It replaces the adversarial relationship that often develops between a traditional buyer and seller as they dicker over the terms of the sale. The seller begins collecting rent without becoming a landlord and you, as an investor, find an end buyer to collect a larger lease option fee and begin collecting a little more rent than you pay to the original seller. The end buyer (that the investor also does a lease option with) now has a home without the hassles of qualifying for a mortgage.
Specifically, you as the investor have a minimum of cash come out of your pocket. That means you have more buying power to do more deals and control more real estate with lease options. You also have another major payday by selling the house for more than you owe the original owner when you sell for more to the end buyer. When the end buyer executes the option to buy, you collect your third and largest payday all from the same transaction. Here’s a short list of benefits that come from buying real estate with lease options:
- A top sales price from the end buyer.
- Positive cash flow.
- The largest list of possible end buyers.
- Minimum risk because you’re not the owner on the title.
- No commissions or fees.
- No maintenance (the end buyer is responsible).
- A large non-refundable option deposit.
You’re offering a huge value to the tenant/buyer when you have an attractive financing plan. This translates into the ability to ask for a higher selling price (even in a slow market). Any reasonable tenant/buyer easily understands the concept of trading price for time and value.
Buying Real Estate with Lease Options for the Tenant/Buyer
One thing you do need to be able to do is clearly explain in detail to the end buyer exactly how buying real estate with lease options works. Make sure they know that eventually they will need to repair any credit problems and qualify for a mortgage. There will be a specific option period this needs to be accomplished within.
Explain they do have to pay an option fee up front. It’s up to you if it will apply to the down payment or not but it’s non-refundable. Applying it towards the down payment makes it easier and more likely the tenant/buyer will obtain a loan to finish the deal. Also, make sure they understand that because they want to own the home, they are responsible for maintenance and repairs. You are not a landlord.
Buying real estate with lease options allows them to determine if the neighborhood and house are a good fit for them without the obligation to buy. The lease option period also gives them time to shop around for the best possible mortgage. That a larger down payment will help them qualify for a mortgage when the time comes.
Explain to them that they need to treat the home as though they are buying it. They should have it inspected as they would an outright purchase – before signing the lease option agreement. Also, suggest they have a real estate attorney go over the lease option agreement with them. Explaining these kind of issues with them builds trust and makes the tenant/buyer more comfortable entering into a lease option agreement with you.
Buying real estate with lease options really is the fastest, easiest, and least expensive way to invest in real estate.
By Wendy Patton
For more than 30 years, I’ve used the Sandwich Lease Option System to earn myself and my students millions of dollars. From my experience, I know there is plenty of room and opportunity in the real estate investment market for everyone wanting to participate to find profitable deals. It’s because of that fact and my personal success that I share the Sandwich Lease Option System with others.
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