Lease options are popular with real estate investors.
Everyday we use leases, options, and notes to prepare agreements for sellers and buyers.
To keep things simple, we can buy on lease option or sell on lease option.
When we buy on lease option we generally either do one of two things:
- We can either buy from a seller on a lease option as a sandwich lease option or
- We can buy from the seller on a lease option and assign our paperwork for a fee to a buyer.
When we sell on lease option, many times we will call it rent to own in our marketing.
The tenant buyer will put money down as an option fee, pay first and last month’s rent, get a rent credit, work on their credit rating, save for a down payment, get qualified for an FHA mortgage and buy the house.
Following are just some of the benefits of Lease Purchasing (Lease Options).
Benefits For Buyers
- Low down payment.
- Qualification restrictions are not as great as in conventional financing.
- Past credit problems are not usually a road block.
- The option consideration can be fully credited to the purchase price.
- Your rent money is working for you.
- Purchase price is usually locked-in ahead of time.
- Gives you sufficient time to check out all the features and faults of the house.
- Time to check out the neighborhood.
- Puts you in legal control of a property for a specified period of time.
- Time to shop for and obtain the best financing.
- Major maintenance and repairs are the responsibility of the owner; you take care of nothing but minor maintenance.
- Profits, in case appreciation occurs and you decide to sell in the future.
Benefits For Sellers
- Usually top sales price for the property.
- Better quality tenants.
- Higher rent than usual for the market area.
- Non-refundable option consideration.
- All minor maintenance is delegated to the tenant/buyer.
- Seller remains on the deed.
- Seller retains the tax shelter.
- No fees to pay.
Benefits For Investors
- Maximum leverage.
- Minimum cash outlay.
- Minimum risk.
- No maintenance.
- Wonderful cash flow.
- Excellent profit potential.
Benefits For The Business Owner
- Little start-up capital needed.
- Little or no credit needed.
- Wonderful cash flow can be generated immediately.
- Excellent and realistic first year income can be achieved.
- Business can be started simply, no major equipment to buy.
- Business can be operated full time, part time or in your spare time.
