Basics of Lease Option Investing
Lease Option is the abbreviated form of the appropriate term “Lease with the Option to Purchase. In a Lease Option, a buyer make and sign an agreement with a seller as a tenant and the owner in this case would be the lessor.
The tenant can take an option to purchase the property at a later date while leasing the property during the current time. When the option term is up, the tenant is NOT obligated or NOT allow to purchase the property , but the lessor cannot sell or rent the property to other people else other than the tenant because it is under the lease option agreement.
In order to to have a valid option, the buyer must provide some value things in order to make the option valid. Then in the option agreement, the 2 parties must agree on the price and the terms of the option when the option needs to be performed. So what that means is the buyer and seller should either come up with a purchase price before signing the agreement.
Some basic steps that how a lease option works :
- A active seller calls you when he is willing to do a lease option on his or her property.
- You provide an option and agree on the terms for a purchase price.
- You take out an option for 24 months.
- The seller’s mortgage amount is $500/mo and he is willing to lease the property for $700.
- The properties in the area are renting for $900, so you decide that you would want to take benefits from the lease option because you can make extra monthly income.
- You also purchase the option below market value so you have a winning deal.
Finally, those are the first steps in doing a lease option deal and you can see that it is very simple for you to do it. If you can wholesale these deals, you will be able to extract properties with little or nothing out of pocket and with no risk what so ever. After that, you will make the cash as much as you can if you do it with the right way.