Lease Option Tips For the New Investor

Posted: Jun 29, 2010 |Comments: 0 |

In a complex and tougher real estate market only the strong will survive and in order to make it through this jungle we want to arm you with some lease option tips to round our investing skill set. Lease options offer another avenue for both buyers and sellers to make a deal work. Sometimes being creative in making a deal happen is the only thing that separates the winners from the losers in this market!

First things first; let's talk about a lease option is. The basic leases option gives the buyer the right, but not the obligation, to purchase the property they have been leasing after a certain time period. The option is sold at a price separate from rents or any other agreement. The buyer, or tenant, pays rents and any other negotiated fees plus the deal can also be structured so they pay a little extra each month towards the purchase price. This arrangement can benefit both parties if structured correctly. The buyer may not have the capital or financing to buy the property outright, but wants to occupy the space in the mean time. The seller will not only get income for selling the option but also have a tenant who has a vested interest in the well being of the property for the term of the deal.

To make the most out of your lease option make sure you research the market, the property's worth and always talk to a real estate lawyer. Laws change from state to state and you want to make sure you are up to date on all of the legal lease option tips for your locale.

The first of our lease option tips is to carefully watch how the deal is structured. This is a time sensitive deal. Most lease options to buy deals last from one to three years. Will you be able to afford this property in that time frame? Will it still be a good deal by then? This brings us the second of our lease option tips; make sure the sales price is in line with the market place. Some deals call for the purchase price to be decided before, which is definitely in the interest of the buyer. Another form is to sell the property at the fair market value at the time of the option expiration. This only benefits the buyer if they are betting the property value will go down. Do you really want to buy a property you know will decrease in value?

Take a serious look at yourself, the property and the deal to see if it makes sense. You are putting money up front to buy the option plus money aside for the purchase price every month that will all go away if you decide not to buy. Make sure the deal looks good before getting into this kind of deal. That's the best lease option tips out there!

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