Category Archives for "Lease Options"

Lease Options for Rent to Own Homes

Though there are any numbers of homes to rent, rent to own homes are not easy to find. Rent to own homes are also known as lease to buy homes or lease with the opportunity to purchase homes. Though all these names are used for rent to own homes, the set up is basically the same.

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The concept of rent to own homes provides the renter the chance to buy the house when the time of rent is up. Generally, the amount paid as rent will be subtracted when the occupant of the house buys the house. The deal will be settled after negotiations according to the market figures. However, the aspects are flexible and are based on the situation of the time. In certain cases the price is decided after negotiation even prior to the moving in of the renter. In each case the options vary.

Buyers get a lot of flexibility in rent to own home situations. Generally, renters rent them to urge a hold at their credit. At other times people move in with the hope of buying the house which they like, at the end of the rental time. this gives the chance to renters to actually move in to a house they like with their possessions and live in it till the fixed time. They get enough time to really know how living in that particular home is, before they take the final decision of actually purchasing the house. As you can see the renter is at great advantage within the situation.

However, for sellers the situation might not end up to be favorable always. Since the buyers have most flexibility and advantage the sellers might lose control over the situation. There’s no surety if the buyer can purchase the home at the end of the rent period. If he does not, the seller would be at a sticky position. He might have lost prospective buyers in the course of the rental time.

Diagram of a seesaw showing buy and rent in perfect equilibrium.

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According to the contract, some sellers get to keep the rent they got even if the buyer does not purchase the house in the end. Sellers consider the rent as profit for their otherwise vacant house. Still the possibility stands that in real estate the seller would have had the chance to sell his house for a greater profit. However, the gain and loss depends on the way the seller takes a deal.

Real estate agents are not much interested in finding houses for rent to own purpose. If you’re searching for one, it’s wise inform your agent beforehand about your intention. If he’s not interested both parties need not waste time. There are many things that require serious consideration when you rent or lease a rent to own home.

Source: ezinearticles

Tips of Beneficial Lease Option

Lease option tips benefit the seller and the buyer in an fair manner. They help in creating a finance required for the transaction of a home deal. The lease option allows the tenant to buy the concerned property within a time period of 12 to 24 months.

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

Benefits of the Lease Options :

There are many benefits provided 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 first payments.
  • The possibility of a monthly credit rent helps in generating the first 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 is not available without costs. An option fee needs to be paid by the buyers, in addition to any potential rent credits and the monthly rent. The seller can keep this money if the buyer is not able to work out the option.

The lease option tips for the sellers are :

  • This option increases the monthly flow of cash for the sellers.
  • Before the selling date, this option also helps in solidifying the cost of the property. This rate of solidifying is good in the real estate market.
  • The lease option point the tenants to taking care of the property, as they have the intention of buying it in the future.
  • The sellers can receive money upfront and can keep it if the tenant fails to perform the option.

Finally, the contracts of the lease options are sometimes very complex in nature. The tips of lease options suggest 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 a part of the sellers.

Source : ezinearticles

Lease Option Techniques

For the investor or home owner, the lease option is a popular method for investor or home owner to sell property and receive profits. These lease option techniques are provided to help both the buyer, the seller, and for the investor, such techniques as the sandwich lease and flipping lease options. There are several lease option techniques, all customizable to your specific situation.

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For the Seller, here are some lease option techniques to consider :

  • Consider owner financing as a lease option technique especially if the tenant is motivated, but simply may have trouble in getting conventional funding.
  • You can require an option fee from the tenant. Requiring even few hundred or a few thousand gleans out those buyers who are less motivated to perform the option.
  • Consider contract terms such as maintenance and repairs. Then the subletting, the one of the popular flipping lease options, and extending the option deadline.
  • The lease option can be a complex document and combines the situation of both the conventional sales and lease contract. Consider a real estate attorney to help you or he can also suggests some advice for you.

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As a Buyer, here are some lease option techniques :

  • Build an escrow account to protect your funds if the owner not honor your option. Most owners are honest, but why take the chance.
  • Start early to secure financing, especially if you need to clean up your credit. If you can start early, the more time that you have is better for yourself. Remember, in most cases you won’t get your money back if you don’t perform your option.
  • You must make sure that you agree with contract language to maximize your lease option techniques.
  • Include a clause to assign the lease to a third party, if indeed you cannot find financing, you can assign it to someone who has.
  • Have the document notarized and record it in public real estate records to encourage the owner to honor the option.
  • The right to extend the option deadline gives you a cushion should the final closing day approach before you’re ready with financing.
  • Consider sharing costs of maintenance with the seller, since you both have interest in keeping the property in pristine condition.

Source : ezinearticles

7 Elements of a Lease Option

Lease options (or Lease Purchase or Rent to Own) are called ingenious and innovative, even though they have been around forever. They’ve also been called one of the only non-confrontational ways of acquiring real estate.

I’ve liked Lease options from the day I 1st heard about them. And there are a lot of things to like about them, they’re low risk, you need little or no money and no credit to do them, you can be in and out in a matter of days or stick around for a steady monthly income.

The 7 Key Elements

  • Lease Term

The Lease Term specifies from when till when the client is allowed to occupy the property, and as a result for how long the client is indebted to make Lease Payments.

The Lease Term will be adjusted down for less risk to the client or up for more security to the seller.

  • Lease Payment

The Lease Payment specifies how much money per period (week, month etc.) the buyer is needed to pay the seller in order to maintain their occupancy rights.

The buyer wants the Lease Payment to be low and the seller wants it to be high. The Rent Credit will be increased or decreased to compensate for a high or low Lease Payment.

  • Rent Credit

The Rent Credit specifies how much of the Lease Payment will be credited towards the purchase Price; if and once the buyer exercises their option to purchase.

The buyer needs the Rent Credit to be high and the seller wants it to be low. As mentioned, it will be adjusted along with the Lease Payment to come to an acceptable compromise.

  • Option Consideration

The Option consideration specifies how much the client is required to pay for the option to get the property.

Similar to the Lease Payment. the client needs the option consideration to be as low as possible, and also the seller wants just the opposite. Often, once a seller is motivated enough, they’re willing to accept a negligible amount of cash for the choice consideration, or even just a promise to keep the other terms of the agreement.

  • Purchase Price

The Purchase price is an easy one to work out. How much should the buyer pay if they decide to exercise their choice to purchase? This could be set at a particular dollar amount, or as a formula, as an example once the buyer is allowed to purchase the property for the balance of the existing mortgage(s).

Again, the buyer needs the lowest purchase price, and also the seller needs the highest. It’s no surprise that the next price is the main reason a seller would be willing to sell on a Lease/Option in the first place. generally speaking, this can be the main point of reference for all the other negotiation points.

  • Option Term

The Option Term specifies how long the buyer’s option to purchase will be in effect.

The buyer will want this to be as long as possible and also the seller as short as possible. Because of appreciation a purchaser can safely agree to a higher price in exchange for a longer option Term.

  • Renewal or Extension Terms

As a final point of negotiation, Renewal or Extension Terms will be agreed on one by one or collectively for the Lease Term and the option Term.

It’s quite common to find an option Term of a few years, with a Lease Term of twelve months that may be renewed year after year. The buyer will want to be able to renew for free, while the seller will either not need the buyer to be able to renew at all, or to pay for it.

Source: ezinearticles

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 Advantages and Disadvantages of Buying a Lease Option

A Lease Option is technically a lease (rental) with the option to purchase. You are renting the home but have the right to purchase the home at anytime during the rental period at a pre-determined price. A lease option also can be a very favorable way to purchase a home because it provides the advantages of home ownership without the disadvantages of ownership.

The main advantages include: (1) No mortgage fees (2) less for a down payment

When structured property, there really are no disadvantages to a lease option relative to purchasing the home with a mortgage. When compared with renting, the major disadvantages of a lease option include: (1) pay more money upfront than renting (2) you are responsible for repairs, not the landlord. Each advantage and disadvantage will be discuss in greater detail below.

 

1. Advantage : No mortgage fees. This is because a lease option is technically a rental, the agreement is between you and the seller. Then it is also because of the bank is not involved, there are no bank fees, meaning that you don’t need to come up with the $5000 to $9000 that it costs to get a mortgage. However, eventually you will have to get a mortgage if you decide to stay in the home long term.

2. Advantage: Less for a down payment. Like the mortgage fees, because of the agreement is between you and the seller, the money down is negotiable, and sometimes not required at all, though the amount down typically ranges between $5000 and $10000 dollars. This is still better than the bank will require.

3. Disadvantage: Pay more money upfront. Typically a lease option requires a greater amount of money upfront than renting. This is not always the case and depends on how desperate the seller is the lease the home. Generally you can expect to pay twice what you normally would put as a deposit on a comparable rental.

4. Disadvantage: Responsible for repairs. One nice thing about renting is that the landlord is responsible for repairs. In a typical lease option, you are entirely responsible for maintenance of a home.
Finally, there are both advantages and disadvantages to buying a lease option. When compared with the buying the home with a mortgage, there is really no disadvantage. But when compared with renting, a lease option is a relative low risk investment for little additional out of pocket expense. The key is in the terms of the agreement between you and the landlord. The terms are negotiable, so make sure that you will do so. To summarize, a lease option can be a win/win situation for both buyer and seller. If you are looking for a home but don’t have enough for a regular down payment or are not sure if the market is going to get worse before better, you can consider a lease option and rest easy.

Source : ezinearticles

Why Lease Options Work in a Bad Economy

In a bad economy, the real estate market usually is the one of the first to shows the signs of distress. There are certainly no real estate investing secrets about the fact that people are not able to get credit, they have lost their jobs and everyone is struggling. It really is not the best time to be entering into a huge financial obligation like buying a home. This means sellers start to get desperate and more homes flood the market as people need to sell or risk losing their homes to foreclosure. There are not enough of buyers. Banks make it even more difficult since they stop lending and start being very picky about whom they lend to. This leads many sellers to consider a lease option on the property. For an investor, this could be a great opportunity to make a nice profit with a lease option agreement.

Why a Lease Option Works

This is the one reason of the real estate investing secrets that works in a bad economy is that there is no lender involved. Instead of making a deal with a lender on a mortgage, it is just the seller and buyer making the deal. The seller agrees to sell the property to the buyer at the end of the lease term and the buyer agrees to pay the monthly lease payment each month until the agreed upon date when they have the option to buy. It is important to note that, if a buyer doesn’t decide to buy at the end of the lease then they do not have to. But if the buyer wants to buy, then the seller must sell for the buyer.

Why This Works For Investors

Investing is real estate when the market is rough is not always the best financial situation. Many investors suffer some great financial losses since it becomes difficult to sell the houses that they have bought. With a lease option, the investor can rent out the property during the lease, which means the renters will pay the monthly lease payment for the investor. At the end of the agreement, if the market has not rebounded and the investor sees no possible way to sell, they can walk away.

Some Things To Keep In Mind

If you choose to move forward, this is one of the real estate investing secrets there are some things you will want to keep in mind so that you come out on top of this deal. You need to make sure that the monthly lease payment is not more than what you can reasonably charge for the rent on the property. You also need to do some research on the area and to make sure that in a good market that you will be able to sell the property. After that, also be sure that you have the potential renters lined up so that you won’t be stuck with the house sitting vacant and having to pay the monthly lease payment.

Finally, there are many ways you can lose money on real estate investing during a recession, but you may trying out lease options because it may actually help you come out on top. Then you may be able to make it through the recession without losing anything and actually making a profit with this creative investing idea. And there you have another of the real estate investing secrets.

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

Lease Option Real Estate Investment

Lease Option Investment

A lease option is basically a rent-to-own contract for a piece of real estate. The buyer signs an exclusive contract to have the buying rights to a property after a given amount of time. When the allotted time expires, the buyer can do one of two things, that are buy at the price agreed on when the contract was signed, or don’t buy the property and forfeit down payment.

To make this easier, let’s take a look at this from a buyer’s eyes.

Buyer

Why would anyone use a lease option for real estate investing? Try risk management. If you were shopping for a home a few years ago (before the market went bad) but were unclear if the area would be hit by recession, you could use a lease option to pay monthly rent and then wait for the contract to expire. The next step is you would be to get the property appraised. As a buyer, a lease option means that you do not have to buy the property. So when you look at the home appraisal after a few years, you compare the current market value to that of the agreed upon purchase price. If the home is worth more than what you agreed, you can purchase it and gain instant equity. But, if the property went down in value, then you can leave the deal with no ties and are only lose the down and monthly payments.

Now, let’s talk about the seller.

Seller

During these poor economic times, it’s very difficult to sell your property since there are many sellers polluting the market and increasing the number of unsold houses. The excessive inventory lowers overall prices. Now, for some reason, so you need to sell your property as fast as you can and fast or cover the payments. Lease options can do both and here is how. Thanks to the financial education available, many people want to buy a home but do not have the credit or the full down payment that needed to buy a home. These people are ready and willing to buy a property but they can’t get a bank to look in their direction. Hence why a lease option for a low down payment that accepts medium to poor credit has such a strong customer base.

Finally, lease option real estate investment is a rent-to-own strategy that works through signing a contract for exclusive buyer privileges at the end of the agreed upon time period for an agreed upon amount. This contract can be very easily work to the benefit of both the buyer and the seller, and allows for property sales at your asking price even in recessed markets. So i suggests that lease option real estate investing should definitely be considered by either the investor, the buyer, or both.

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