The following is a real estate investments.
Now As a side note, I never sign anything or conduct any Real Estate transactions without my attorney reviewing the documents. It’s worth the extra money, trust me. We’ll talk more about the importance of attorneys in another post. How It Works
As I stated, there is much more that goes into putting a Lease Option transaction together, but that is basically how it works. There are several positives and negatives to this type of transaction. Let’s take a minute to look at a few. First, let’s look at the positive.
What You Gain
You have acquired a property with no money and made money from your tenant buyer with their Non-Refundable deposit, as well as their monthly payment (You should always make money on the monthly spread between your buyer and seller.
Pro Tip: I have a rule of at least $200 positive cash flow a month per property. I have some as high as $600, but as a rule, I like to have at least $200 per house each month. In theory, your tenant buyer will at some point go to a bank and cash you out, and you will make a big chunk of money when he/she does that!
What You Risk
Here is the reality, and something you will not hear at a majority of Real Estate Investing seminars, where the individual speaking is attempting to sell you his/her program.
Ninety percent of the time, your tenant buyers are B & C credit buyers. They are attracted to your “Rent to Own” program because no bank would EVER loan them money.
In this economy and market, these buyers are everywhere.
The reality is, few of them (only 10% in my experience) actually clean up their credit and end up buying the house. Also, you will have a huge number that you will be forced to evict who will tear up the property. I say this not to scare you, but to prepare you if this is the Real Estate vehicle you choose to pursue.
If you do this, make sure you get a huge Option deposit to cover lost rent, attorney’s fees and damage done to the property.
Is It Worth It?
Is there money to be made with Lease Options? Yes.
If you find the right tenant buyer, regardless if he/she buys the house, you will make money on the Option deposit, and the monthly rent spread. If you are not forced to evict this person, and he/she does not tear up the house when they leave, consider yourself lucky.
Is Real Estate investing with Lease Options easy? No way. I have had more headaches from Lease Options than any other type of transaction.
On the one hand, you have a seller yelling at you to sell their house and get the loan out of their name; regardless of how long a time frame you have to get it done. On the other hand, you have a B/C credit buyer who is far less than motivated to do what he/she needs to actually finance the house.
As I stated, there is much more that goes into putting a Lease Option transaction together, but that is basically how it works. There are several positives and negatives to this type of transaction. Let’s take a minute to look at a few. First, let’s look at the positive.
What You Gain
You have acquired a property with no money and made money from your tenant buyer with their Non-Refundable deposit, as well as their monthly payment (You should always make money on the monthly spread between your buyer and seller.
Pro Tip: I have a rule of at least $200 positive cash flow a month per property. I have some as high as $600, but as a rule, I like to have at least $200 per house each month. In theory, your tenant buyer will at some point go to a bank and cash you out, and you will make a big chunk of money when he/she does that!
What You Risk
Here is the reality, and something you will not hear at a majority of Real Estate Investing seminars, where the individual speaking is attempting to sell you his/her program.
Ninety percent of the time, your tenant buyers are B & C credit buyers. They are attracted to your “Rent to Own” program because no bank would EVER loan them money.
In this economy and market, these buyers are everywhere.
The reality is, few of them (only 10% in my experience) actually clean up their credit and end up buying the house. Also, you will have a huge number that you will be forced to evict who will tear up the property. I say this not to scare you, but to prepare you if this is the Real Estate vehicle you choose to pursue.
If you do this, make sure you get a huge Option deposit to cover lost rent, attorney’s fees and damage done to the property.
Is It Worth It?
Is there money to be made with Lease Options? Yes.
If you find the right tenant buyer, regardless if he/she buys the house, you will make money on the Option deposit, and the monthly rent spread. If you are not forced to evict this person, and he/she does not tear up the house when they leave, consider yourself lucky.
Is Real Estate investing with Lease Options easy? No way. I have had more headaches from Lease Options than any other type of transaction.
On the one hand, you have a seller yelling at you to sell their house and get the loan out of their name; regardless of how long a time frame you have to get it done. On the other hand, you have a B/C credit buyer who is far less than motivated to do what he/she needs to actually finance the house.
