We are in a new reality in the real estate market. Gone are the days where you can just buy a house and watch it automatically increase $100,000 in equity in a couple of years. As the market conditions change it is up to us as savvy investors to change our strategies and tactics to work within the market that we have to invest in
As an investor that specializes in working with properties that are in foreclosure, one very powerful profit strategy that you can use to maximize your income in this changing market is to use lease option investing. This style of investing is excellent for this market and works very well when you are acquiring properties that are in a pre-foreclosure status.
When you acquire a property that is in pre-foreclosure you need to have a strategy to profit from that property. It does you no good to go through all of the negotiations and work involved to acquire a property just to find that you have no way of making money on the deal.
A lease option is an excellent way for you to maximize on the overall profit that you can earn from a real estate investment. By utilizing a lease option, there are a number of benefits that you can take advantage of particularly in this market.
So what is a lease option? A lease option is an agreement between the owner of the property (in this case you) and a potential buyer of a property. With this agreement the potential buyer agrees to lease the property from you for a pre-determined time period.
In return, you offer the potential buyer the right to be able to purchase the property from you from a specific price at anytime during the term of the lease. The price is fixed at an amount equal to and sometimes lower than the going prices for real estate in today’s market.
The potential buyer pays rent that is equal to or sometimes lower than the going rents in the area. The buyer also pays what is called an option consideration. This is a set amount determined by you the seller as a price for offering the buyer the option to purchase the property.
Should the buyer go ahead and exercise the right to purchase the property, the option consideration is used as part of the down payment for the property. However, if the buyer fails to purchase the property before the option period expires, you as the owner of the property can keep it.
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