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.
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.
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.