All Posts by Jackie Yee

Beneficial Lease Option Tips

Lease option tips benefit the seller and the buyer in an equal manner. they help in making a finance required for the transaction of a home deal. The lease option permits the tenant to buy the involved property within a time period of twelve to twenty four months.

Lease options are a good source for purchasing homes for the first timers of home buying who have not qualified for the finance options. they give the buyer’s time for getting their finances in shape for purchasing the property. The lease options are great marketing tools for the sellers of properties for finding good buyers.

Benefits of the Lease Options:

There are various benefits for the buyers as well as the sellers of the lease options. The lease option tips for the buyers are listed below.

  • The tenants get the facility of paying a small amount upfront for the house. This amount is smaller than the normal down payments.
  • The risk of a monthly credit rent helps in generating the down payment, resulting in a savings account for the buyers.
  • The buyers can enjoy the benefits of living in the house that they dream of now instead of renting an apartment and waiting to repair their credit.

But, this convenience isn’t available without costs. an option fee has to be paid by the buyers, additionally to any potential rent credits and the monthly rent. The seller will keep this money if the buyer isn’t able to work out the option.

The lease option tips for the sellers are as follows:

  • This option will increase the monthly flow of cash for the sellers.
  • This also helps in solidifying the cost of the property before the selling date. This rate of solidifying is good in the real estate market.
  • The lease option prompts the tenants in taking care of the property, as they have the intention of buying it in the future.
  • The sellers receive cash direct and can retain it if the tenant fails to exercise the option.

The contracts of the lease options are sometimes very complex in nature. the tips of lease options recommend that the language of the contract has to focus on the contract terms, rather than the price. The finding of buyers for the lease option, demands a considerable amount of time investment on part of the sellers.

But the lease option tips are an encouragement for the sellers to investigate the markets thoroughly for predicting the appreciation of the property’s value in the future. Hence, it’s recommended that the sellers invest time in forecasting the price of selling along with the search for prospective buyers of the lease option. Laws of the state have also to be investigated for ensuring abidance with the regulations for the mechanism of the lease options.

Source: ezinearticles

The benefits of a lease option

There are many benefits to a lease option:

1- You can charge more per month than you’d for a rental, because part of the monthly fee is the non-refundable option.

2- If the tenant decides not to purchase the home, the option money is yours.

3- You attract different clients-clients who are looking to possess a home, who take into account the home theirs while leasing it from you because they’re paying into the equity of their future purchase. Even if they decide to not buy at the end of the lease term, they’ve probably cared for the property better than typical renters.

4- You can help people own homes who might not otherwise be able to purchase, because they’ll be building up a down payment a small amount at a time.

Because you still own the property, you get the tax write-off during the lease period, and if the tenant defaults, you’re still on the deed and can re-sell the property after a simple eviction process (not a foreclosure).

The buyer benefits, as well. Not only do they get to slowly build up a down payment with the option cash, but they also have a predetermined price for the house. If the market suddenly swells, they realize the additional equity when they build the purchase.

You could make money with this method without even owning the property. It is true, and it is easier than you think. All you do is find motivated sellers who are willing to sell to you on a lease option so match those homes with buyers who want to buy on a lease option. It’s really that simple. Legal tip to remember,- in order to prevent problems ought to your potential buyer default, don’t ever let them pay the taxes and interest on the property and always refer to them as a tenant and not a buyer. This will secure your right to evict and not have to foreclose on defaults.

Source: ezinearticles

How to Make Money Using Lease Options in Real Estate

There are a lot of different ways to make money in the real estate world. you’ll get into the flipping part of it, the agency selling part, or even the leasing part. when people think about making money investment in real estate for the most part they’re looking for a way to make a large amount of money all at once. This need for the large sums is why flipping and becoming an agent are the common courses of real estate investing. making money using the leasing option can bring in a steady cash flow but you may get it in payments as opposed to one lump sum.

Leasing homes and apartments allow you to provide a living arrangement for families that need them. Since you own the homes or apartment building that you are leasing out you will be able to set the worth that you want your tenants to pay. ensure that you set the prices so that they’re reasonable or you can have problems finding occupants for your space.

Leasing commercial real estate is another great way to make money. find a building that’s easily accessible. you will want a building that’s around different successful commercial buildings. A building that has plenty of parking and space are more desirable than one that doesn’t. If the commercial property is in a very desirable space you will have no problems filling it. Once you have someone operating your commercial property you’re guaranteed to have a steady monthly income.

While most people assume that you have to either flip or become and agent to make money in real estate, the truth is that you will supplement your income quite nicely and permanently with the leasing option. Leasing real estate is a great way to play in the real estate game without having all of the loose ends to tie up in the flipping world, and all of the classes you have to take to become an agent.

Source: ezinearticles

Benefits of the Lease Options

Increasing the financial gains and reducing the risks are the main aims of an investor because these will help an investor to build his or her investment portfolio. If the investor could be a real estate investor and he invests in the Lease purchase real estate deals then the financial gains become more secure and the exposure to risk is also limited. The financial gains will become secure and the risk will also be limited because the lease purchase agreement will allow the investor to use the property and check the advantages and disadvantages after paying the lease amount to the owner. If there are too many disadvantages associated with the property and the investor feels risky to continue in the deal then he can withdraw himself from the deal.

The benefits of the lease options are not only to the investors but also to the sellers. The sellers also enjoy a lot of benefits from these deals. These deals are better than the regular rental arrangement. the benefits enjoyed by the sellers are explained below.

Higher amount of cash inflow or upfront payment

In the regular rental arrangement, the homeowners get only monthly rental but in the lease purchase deals, the homeowners are paid option fee. The option fee is paid upfront to the homeowner and is quite the monthly rental. So a homeowner has more profit in leasing his home rather than giving it to a renter on monthly rental.

Higher selling price

The total amount that a seller is paid for selling his property is more than he will make in the normal selling because the total selling price won’t only cover the total sale price but also the rental during the lease period.

Minimal Maintenance cost

The maintenance cost for the houseowners will be minimized because the total maintenance cost of the home will be shared by the tenant. The tenant is responsible to share the maintenance cost because the tenant is also considered as the partial owner of the property during the lease period.

Attract better tenants

The property of the owner will be maintained because the maintenance responsibility is shared by both the owners and tenants. The well maintained property would attract more tenants or the buyers and if this tenant doesn’t successfully close the deal then the homeowner will begin his deal with the next reliable and high paying tenant.

Tax benefits

The monthly income made from the lease purchase arrangement is classified as monthly rental income. The taxes are reduced because the rental income is considered as the passive activity income and these are the tax benefits to the homeowners.

All the benefits are more than enough to encourage any homeowner to sell his property through the lease purchase agreement.

Source: ezinearticles

Basics of Lease Option

Lease option strategy is used for selling properties in a hard market where there are only a few qualified buyers. If the property is easy to sell then it’ll be more convenient for you to sell the property in the conventional way wherein the buyer pays you cash for the purchase.

Benefits of Lease Homes with Option to Buy

  • It is a good way for you to sell a vacant property at market value on that you’re paying a mortgage.
  • It helps a buyer with a poor/ no credit history or down payment to buy a home. Such buyers will not qualify for a home loan from a bank. These buyers get the benefits of home ownership.
  • Although the client will be making higher lease payments that may exceed market rent they will be making payments towards their down payment.
  • The buyer gets the benefit of capital appreciation on the property during the period of home lease to buy.
  • For the buyers who lack self discipline will have the benefit a forced savings plan because part of the rent is credited toward the purchase price of the house which is adjusted at the end of the lease possibility agreement.
  • As opposed to a normal tenant a home lease to buy renter pays won’t only look after the property as his own but can often make improvements to the house.
  • A lease with option to buy tenant will also pay all the outgoings on the property which will lighten your financial burden and risk considerably.
  • If the lease option purchaser defaults, you as a seller are not obliged don’t refund any portion of the lease payments or the option money unless and otherwise it’s specified in the contract. You will also retain the right to sue purchaser for breach of the agreement.

Source: ezinearticles

Success With Lease Options

To say that the mortgage market has changed from two years ago is an understatement. Over 70th of banks have tightened their standards and most will wait till confidence has been restored in the market before relaxing their qualifications.

So what is the solution for those who once would have qualified for a mortgage but no longer do?

More and more, those who want to be homeowners are turning to Lease options as their short term solution.

Is this is a good thing?

Like anything else, it really depends on the quality of the program one enrolls in. The reality is that most people who enter into lease options fail. Here are 5 key considerations that will help ensure success.

1. Many companies and investors actually don’t want you to succeed. Sadly, this is a common system taught by many of the nation’s top investment gurus. Their plan is simple — collect option money from you upfront, do nothing to ensure that you are in position to purchase the home and then set the price so high that even if you do everything right, you still can’t buy the house because no bank would finance it! They keep your option money, you’re forced to move and they repeat the process with someone else. Avoid investors who don’t have your best interest at heart. If they don’t seem concerned about credit repair and helping you get back on track, they probably do not intend for you to ever buy the house.

2. Another common reason for failure is simply procrastination on the tenant’s part. you intend to repair your credit….some day. The truth is that repairing credit takes time. Usually more than a year. it’s IMPERATIVE that you just begin as soon as you sign the lease and remain diligent about it throughout your rental term. Ideally, you will work with both a Loan Officer and a reputable credit repair company.

3. Along the same line, a lease term that’s too short can spell disaster. You need to work with someone who understands mortgage qualifications and ensure that your lease term is long enough for you to qualify. A twelve month lease term, unless your credit is already fairly good, can almost always lead to failure.

4. Another common issue is not saving for a down payment. Yes, you hope your rent credit are sufficient to cover your down payment. But the reality is that no one knows what the banks are going to be doing two years from now. It’s better to be safe than sorry—save, save, save!

5. You would not accept a mortgage that didn’t report to your credit. Why accept a lease option? The mortgage market is tough enough as it is. You need all the help you’ll get. Twenty four months of on-time payments will do a wonder to help improve your credit score. It’s not that difficult for the seller to set up and it shows commitment on both sides.

Lease options can be good for both buyers and sellers, but they must be done right!

Source: ezinearticles

Real Estate Beginners Can Profit From Lease Options Strategies

For many investors, the use of a Lease Option Strategy makes good sense. Here’s why.

HOW IT WORKS

For beginners with little or no cash, this might be a very good strategy indeed. The Lease option Strategy has 2 components. under the law, an option is a way for a real estate investor or buyer to enjoy the right — but not necessarily the requirement — to buy a specific parcel of real estate in a given market. the option component allows you as an investor to control investment real estate and to position yourself for later profit while not essentially having an obligation to buy. You may then lease the property (retaining the choice to buy it later for yourself if you choose to do so), and turn the property into a cash-flow cow. In negotiating the original transaction with the owner, you’d agree to a specific purchase price. That way, your price is locked in even if the market value goes up significantly.

CREATE A PROFIT GOING IN

With the property now under your control, if you ‘do the math’ and the numbers make sense, you can go ahead with the purchase from the previous owner if there’s an opportunity to make a profit when you later sell. Let’s say you acquire a certain property on a Lease Option basis. Assume for discussion you agreed on a $500 per month rent and a $100,000 purchase price with the owner. You might then sub-lease the property out to a tenant for $650 per month and by monitoring the local market you might decide to buy the property at $100,000 as agreed. You then offer your tenant a Lease Option at an even higher purchase price of $125,000, perhaps with lease payments (or a portion of them) being applied to the down payment. Under that arrangement, your tenant will be better motivated to take care of the property (since they might one day be the owner). At the same time, you would be in a better negotiating position on the selling price. Your tenant could have the lease payments (or a portion of them) applied to the down payment. Under such an arrangement, you might negotiate a better selling price than otherwise, and enjoy a win-win transaction.

FISHING THE WATERS

The Lease option Strategy is one of many real estate investment techniques. It works well in soft markets, where there are more properties for sale than there are buyers. wherever you find a property owner with a low equity-to-debt ratio, and they need to rid themselves of the property, you might find the owner willing to do a Lease option. It also works well where the local market is experiencing a high number of foreclosures. The ‘teaser rates’ that many lenders offered a few years ago are creating thousands of foreclosures around the country as the adjustable rates get increased. you may profit by using the Lease choices strategy in your favor in those real estate markets. look for Lease choice opportunities in single-family homes as well as duplex and apartment buildings. With a property tied up in a Lease option, this provides you time to arrange suitable financing or to find your own arrangement in which you buy the property whenever your tenant is prepared to buy.

Source: ezinearticles

Whenever I’ve spoken at various investor and business workshops around the country, one of the most common questions from real estate investors during a seminar break is “What’s the best way for a beginner to get started without too much risk?”

Article Source: http://EzineArticles.com/443367

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The Advantages of Using a Lease Option For Real Estate Investors

A real estate lease option is a great opportunity for real estate investors when the housing market is not at its best. That is one reason everyone seeking real estate investing success should consider this strategy.

Financial advantages

A real estate lease option offers a variety of financial benefits to an investor. using this type of agreement means less investment up front. you don’t need the full amount to buy the house till the end of the agreement. you also will usually get into a lease option without a lot of money up front at all. it’s a lot like a typical rental agreement so you always will only would like the first month’s payment and a down payment equal to your monthly payment.

You also will get approval in your agreement to sublease the property. this means that you rent the property to renters and make cash each month off the property. you can often pay your monthly payment to the seller and still have some money left over, so you’re making a profit of the property before you even own it.

Less of a Risk

A real estate lease option is less risky than buying a property outright. You get the chance to really inspect the property before you buy. you will have the lease period, usually between one and 3 years, to urge to know everything about the property. you’ll discover all the little issues and all the big problems that will not have been apparent at first. If something arises that is a major issue, you can walk away at the end of the lease and not ought to take on that headache.

A lease option also allows you to feel out the market. you may be ready to extremely see if there is interest in the house. you’ll watch what’s happening with other homes within the area. You get a feel for whether or not you may be able to sell this property once you do buy it. If you see that selling is going to be tough then you walk away at the end of the lease without buying.

You also have the chance to look for a buyer during the lease

You may be able to find somebody who can get the property from you as soon as you buy from the seller. This will mean an immediate profit and of course real estate investing success. You can rent out the house to tenants and give them the option to consider buying if they like the property. This will need explaining to them the lease option you have and how everything can be finalized once you complete your a part of the lease choice agreement.

Having the option to walk away allows you to lower you risk completely with a lease option. you also get to earn money through subleasing and avoid large financial risks if you discover the property has a massive problem that would be too costly to fix. A lease choice gives you many advantages as a real estate investor and that is why it’s a popular real estate investing success option for many investors.

Source: ezinearticles

Even in good times, a lease option may be the best option for investors who are low on capital or who are just starting out. There are actually quite a few different advantages to real estate lease options every real estate investor should know.

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Lease-Option – The Other Way to Sell

In most real estate markets nowadays selling your home has become much more difficult. As we watch with our own eyes our property values are decreasing rapidly.

On top of that there are numerous bank owned properties out there yours will not even be noticed.

The banks usually reduce their prices about every month till the properties are sold in most cases in our current market situations. Can you afford to reduce your value every month to keep up with the competition? If you’re lucky enough to own a significant amount of equity in your property you just might be able to keep up but for how long.

Sit back in your chair and consider other ways to sell your property without taking a loss. If you’re able to you may simply rent out your property. In a best case scenario the rent are going to be able to cover a majority of your monthly costs. Then you’ll just sit back and wait out this storm for several years. In a worst case scenario you do not have a lot of time left and a renter wouldn’t pay that a lot of for your property.

row-of-houses1

In both good and bad situations a lease-option is another strategy you’ll use to sell your property. There are many different benefits to a lease-option. The most vital one is that you can sell your property for higher than market value. the amount of rent received is also higher in this situation. You’re going to turn this bad situation into a win-win situation for you and your potential buyer.

Potential buyers are everywhere out there! they just need a little help. They have good paying jobs, but have had some challenges in the past. Usually they have a below average credit score which impairs them from getting a loan on their own.

lease-option

cbtownandcountry

A lease-option is basically is a rent to own situation. You’re planning to rent the house out for the future purchase price’s payments. Yes, people will pay the higher rent! they’re not renters they’re future homeowners. You will usually sign a lease with them for about 24 months. It all depends on how long it’ll take for them to qualify for a loan to buy your home. It’ll be up to you to set them up with a mortgage broker that will be able help them purchase your home in the future. Ensure that the person you choose if on the correct path will be able to purchase the property in the end! they will also pay you a non-refundable option up front. The amount usually is around 3 to 5 % of the purchase price. The option money received is yours if they purchase or not. If they do purchase, the option will be deducted from the purchase price at closing. If they do not purchase and decide not to renegotiate then the option payment is yours to keep.

Source: ezinearticles

If you break it down the positives are higher rents, maintain property better than renters, depreciation, and higher purchase price. The worst thing that could happen is that they wreck the house and you have insurance for that. If they do not buy, you get to keep their option consideration and they paid your payments for twenty-four moths. Hopefully in the end they will be able to buy yours.

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Advantages and Disadvantages for Lease Option Real Estate Investing

One creative way to get started investing in real estate is to use a lease option. The biggest advantage of using lease options to invest in real estate is –control.

Wood block building and hand writing

realtor

A real estate lease option contract is a combination of two documents.

The lease part of the contract is where the owner agrees to allow you to lease their property, while you pay them rent for a stated period of time. during the lease period, the owner can’t raise the rent, rent it to anyone else, or sell the property to anyone else.

The option part of the contract represents the correct you purchased to buy the property in the future, for a specific price. If you decide to exercise your choice to buy, the owner has to sell it to you at the negotiated price. the option part of the contract obligates the seller to sell to you during the option period — but it does not obligate you to buy. you’re only obligated to make rental payments as agreed during the lease period.

When the lease option contract is written and structured properly, it can provide tremendous benefits and advantages to the investor. If the lease option includes the “right to sub-lease”, the investor can generate a positive income by renting the property to a tenant for the duration of his lease, or lease option the property to a tenant-buyer for positive income and future profits. If the lease option includes a “right of assignment” the investor might assign the contract to another buyer for a quick profit.

Business concept isolated on white

realtor

Lease option real estate investing, is a flexible, low risk, highly leveraged method of investing that can be implemented with little to no money.

High Leverage

It is highly leveraged because you’re ready to gain control of a property and profit from it now–even though you don’t own it yet. the fact that you don’t own it, also limits your personal liability and personal responsibility. Only if you decide to purchase the property by exercising your “option to buy”, would you take title to the property.

Little to no money

The real estate investor’s cost to implement a lease option contract with the owner needs little to no money out of pocket, because it’s entirely negotiable between investor and owner. Also, there are a variety of ways the option fee can be structured. It can be structured on an installment plan, balloon payment or other agreeable arrangement between both parties. the option fee can even be as little as RM1.00.

In order to secure the property for purchase at a later date, tenant-buyers typically pay a non-refundable option fee of approximately 2%-5% of the negotiated future purchase price to the vendor. Depending on how the lease possibility agreement is written and structured, the investor could possibly use the tenant-buyer’s option fee money to pay any option fee owed to the owner.

Flexible

Lease option real estate investing is a flexible method of investment because the terms of the agreement, like payment amounts, payment dates, installments, interest rate, interest only payment, balloon payments, purchase price and other terms are all negotiated between seller and buyer. Responsibilities of each parties are also negotiable. for example, if the investor does not need to act in the capacity of a landlord, he may specify in the lease option agreement that tenant-buyer will be responsible for all minor maintenance and repairs and the original seller can remain responsible for any major repairs.

Financially Low Risk

It is low risk financially, because if the property fails to go up enough in value to make a profit, you have the purchased the right to change your mind and let the “option to buy” expire. Even if your tenant-buyer decides not to buy the property, you have profited by a positive monthly cash flow from the tenant-buyer’s rent payments, and upfront non-refundable option fee.

Source: ezinearticles

This method of investing, basically gives the investor the right to possess — be in control of — and profit from a property without owning it.

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