Tag Archives for " Lease Options "

Real Estate Beginners Can Profit From Lease Options Strategies

For beginners with little or no cash, this could be a very good strategy indeed. The Lease Option Strategy has two components. Under the law, an option is a way for a real estate investor or buyer to enjoy the right — but not necessarily the obligation — 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 without necessarily having an obligation to buy. You might then lease the property (retaining the option 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 would 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 RM500 per month rent and a RM100,000 purchase price with the owner. You might then sub-lease the property out to a tenant for RM650 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 RM125,000, 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. Where 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 might profit by using the Lease Options strategy in your favor in those real estate markets. Look for Lease Option opportunities in single-family homes as well as duplex and apartment buildings. With a property tied up in a Lease Option, this gives you time to arrange suitable financing or to find your own arrangement in which you buy the property whenever your tenant is ready to buy.

Source: Ezinearticles

Why Leasing Makes Sense in Today’s Real Estate Market

Due to the severe downturn in the economy, many sellers are finding themselves ‘underwater’ in their homes. This means that they owe more money than the house is currently worth. This makes sellers desperate, and they will often make foolish mistakes in how they try to sell the house. That is where options that they haven’t thought of before come in. Most people don’t realize there is more than just the traditional one way to sell a house. A home can also be leased with an option to buy.

The lease with option is not new to the market, but it is has not been common in recent years. In the last decade, the housing market boomed and people who had previously been ineligible for a loan found themselves with multiple offers being thrown at them. Why lease when you could buy?

But now many of those new homeowners are underwater and need help, and that is where a lease option comes in. This is a traditional lease for a property (this could be residential or commercial) with an option to buy.

The other is a lease purchase, which is a traditional lease term that is also a purchase. Sound confusing? It really isn’t. A lease purchase is a lease that will become a purchase once any missing criteria are met. For example, a person may need to tidy up their credit before they can officially be given a bank loan for a purchase. They are given a lease while their agent helps them get the necessary credit rating to qualify for the loan. At that time, the lease then becomes a purchase.

The lease option or lease purchase works for both parties because it enables the desperate seller to recoup their monthly mortgage payments while still finding another home. It works for the buyer because there is no money down, and any appreciation in the property is to their advantage. If the market begins to recover as you lease, that value is added to the home should you want to sell it later, after purchase. It should go without saying that there is a lot to be gained by going this route, and almost all of the gain is for you, the investor.

Source: Ezinearticles

Capital Raising

Capital raising has many pitfalls. To avoid some mistakes that others have made in the past, here are our top three, most costly capital raising mistakes:

Capital Raising Mistake #1: Having a 2-4 month capital raising goal.

It is important in the capital raising game to set concrete goals and timeframes for meeting those capital raising goals. Otherwise, you may drift along without any real sense of whether or not your efforts are paying off and if you are on track to meet your ultimate goal of closing the fund. Moreover, setting a goal of just 2-4 months is unrealistic and the wrong mindset to go out of the gates with.

You need to plan, build relationships, educate potential clients, and design high quality marketing strategies and materials for the long term. Make plans for 12-24 months and beyond, and make sure that you are maintaining those relationships even after your current campaign ends so that you can be ready to start the next one. While it is important to set goals for a reasonable timeframe, I prefer to view capital raising as a constant cultivation and nurturing of relationships. In a relationship, either business or personal, you typically do not impose an expiration date on that relationship. Why would you do so when raising capital?

Capital Raising Mistake #2: Counting on building a track record and then simply hoping to outsource all marketing to a great third party marketing firm or placement agent down the road.

This puts all of your eggs into the one third-party-marketing-basket. Third party marketers have hundreds of potential clients approach them each year. It is risky to assume that one will not only take you on as a client but actually raise a sustainable level of capital for you.

The second hidden danger of this strategy is that you maintain an infant-level of capital raising experience and knowledge until you start actively raising capital. You need to start moving up the capital raising learn curve immediately. Even if you rely primarily on third party marketers, investors require near-constant affirmation that they have invested their money with the right manager. This demand of regular attention is often at odds with the other demand that investors have, which include full-time attention to managing their capital. This can often frustrate a busy fund management team who prefer to simply focus on investing assuming investors will be satisfied as long as the returns are strong.

Instead of simply ignoring the problem in favor of focusing wholly on investing, the management team can instill greater confidence in their investors and cut down on the investors’ questions, concerns, and requests for updates by proactively communicating and interacting with investors on the GP’s schedule. I have known many managers who are brilliant traders and money managers but put little effort into developing as communicators and marketers. This makes the capital raising process more difficult when introductions are made and may even hurt current client relationships. By improving your own marketing and communication skills, you can more easily assuage investor fears and doubts, instill confidence in new and existing clients, and reduce the amount of time spent answering questions that you could address proactively.

Capital Raising Mistake #3: Under-estimating the value of a first name basis relationship with your top investor prospects.

Some professionals, especially those with technical backgrounds, think that marketing is a numbers game: you simply contact thousands of investors and you’re bound to come up with a few interested LP’s. This is only partially true. At times, you might have to reach out to many to develop relationships with a few investors, but relationships are at the core of everything that gets done. Most private equity firms we’ve worked with have found that by maintaining a strong, active relationship with a core group of limited partners. This way, the capital raising process is much easier when it comes to your next round as it doesn’t feel like a call for money. It is an investment opportunity from a close contact with an existing relationship. You can then use a database of new investors to supplement your existing network and start fresh relationships with less pressure to close immediately.

I’ve found that it’s best to upload my database of investors into a CRM system that allows me to keep real-time notes on my investor contacts and set reminders to stay in contact-that way I know I’m always keeping up with my best relationships and can better strengthen that relationship going forward. Investors like to place capital with people they know and trust, the more investor friends you have the better.

By following this approach and avoiding the mistakes highlighted here, capital raising becomes a much more effective process and hopefully more lucrative for all involved.

Source : Ezinearticles

For more information please visit http://bit.ly/propertymillionaireintensive

5 Common Residential Finance Questions of Home Buyers

No matter where you live, a home is a basic requirement and a necessity for life. Sadly, no necessity is available free of cost. If you want to buy a home, you need a home loan. Don’t think applying for residential financing is difficult. It’s simple when you read this article. It includes answer to the most common questions asked by home buyers.

1 – What Type of Residential Finance is available to you?

Today there are several types of loans in the field of residential finance.

• Owner Occupied Residential Purchase

• Residential Investment Purchase

• First-Time Home Buyer

• Renovations, Extensions and Construction Purposes

• Refinance of your Existing Loan

• Debt Consolidation of your Existing Home Loan Debts

• Home-Equity/Cash Out purpose

• Restructure your Home Loans with Current Lenders/Credit Providers

2 – What are Features of Residential Finance?

Each lender/credit provider offers different interest rates and finance/loan conditions. Residential loan packages often incorporate many of the following options and features for you to consider:

• Variable or Fixed Rate Loans

• Interest Only or Principal & Interest Loans

• Combination (Split Loans)

• Line of Credit

• Offset Account

• Impaired Credit History

• Redraw Option and Access Availability

• Non-Conforming Loans

3 – What is Home Equity/Cash Out? How can it benefit you?

A Home Equity/Cash Out can unlock relatively large amounts of money for borrowers who want to borrow against the value of their home or property. More and more consumers are finding this type of finance arrangement to be very attractive. Such loan programs are very easy to qualify.

The concept of how Home Equity/Cash Out works for you is best explained by the following illustration. The illustration also assumes that you have an existing residential finance loan on your home or property:

The value of your home or property is valued at: RM800,000

Less Your current home loan balance owing: RM350,000

Your home equity amount is: RM450,000

From the example illustrated above you can clearly see that you have RM450,000 equity in your home or property, which you can use to:

• Buy your second or third investment property

• Invest in shares or managed funds

• Renovate, remodel, or otherwise improve your existing home and property

• Purchase vacant land and construct a new home on the vacant land

4 – Why Pre-Approval is better in Residential Finance?

With a pre-approval, you will have the peace of mind knowing that:

• You have a clear picture of what your borrowing limits are

• Your finance request has already been pre-approved and you will know the conditions of your pre-approval

• You have the upper hand when negotiating the sale price with the vendor, real estate agents, etc.

5 – How to get Lower Rates on Residential Finance?

Getting lower rates on home loans is very simple. Take help of the internet. There are many online companies that provide residential finance opportunities. Because of heightened competition in the financing market, lower interest rates are offered. Also, web companies offer faster approval because of their online nature of business.

So, these are the questions that often trouble other home buyers. But, now that you have answers to them, finding an affordable residential loan will be easy for you.

Source : Ezinearticles

For more information please visit http://bit.ly/propertymillionaireintensive

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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cleverinvestor

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.

realsourcebrokers

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

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