One of today's most profitable real estate investing tactics is using a combination of leases and options. Here's how it works:
You are an investor who buys and sells rental homes for profit. There are many ways to negotiate the purchase of a home. Of course, you can always make a purchase offer that includes your cash down payment coupled with a new mortgage loan.
Even with low down payments few investors have enough cash to do more than one or two deals.
No, it just not practical to tie up cash in each deal of you plan on buying 8 or 10 investment properties. These days many investors find a motivated seller who will listen to a more creative offer. The investor explains why it is in the seller's best interest to lease the home to the investor with an option to buy in some set period of time. Often the term of the purchase option will be from 1 to 5 years.
At some point the investor will want to sell a property to get to the cash profit. One of the ways to sell a home for top dollar is to sell it on a lease with option to purchase. Often the investor can offer a buyer with weak credit the opportunity to buy a home when no one else will.
Because the buyer has a low credit rating the investor is entitled to a little more profit for taking the risk. This enables the investor to price the home 10% or 15% above market value and get a monthly payment 10% or 15% above normal.
The buyer is happy. They are able to own a home and begin building equity. The investor is happy. He makes a greater profit and the tenant/buyer treats the home as if they own it... as they can within a few months.
Often the trick is to find a buyer who is worthy of such a deal. Eureka! There is now a service, LeasePurchaseLeads found on the internet, that has list of tenant/buyers that are motivated, ready to move, already have a down payment, understand how a lease purchase works, and are serious about moving in?
To narrow it down even further, the tenant/buyers on the LeasePurchaseLeads list tell you exactly what kind of house they need, and where it needs to be. The investor then looks the list over and selects the ones with the highest down payment, and/or the ones that are ready to move right now looking for a home like the investor's. There's no fee to join the service and no fee to look over the list of potential lease option buyers. The investor only pays a nominal fee to get the name and phone number of anyone on the list that seems to be an ideal buyer.
If you've ever had to spend time search for suitable lease option buyers you'll recognize the value of this service. It will cut your vacancy time factor way down.
Long live the lease option strategy! |
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