Did you know you can invest in real estate without even having a property? It’s called a Lease Option. You may know it as Rent to Own.
A Lease Option is where someone has a legal agreement that stipulates that they have a legal right to buy the property in a given timeframe. The homeowner cannot legally sell the property to anyone within that specific timeframe. Basically, you rent until you are able to own which gives you time to get your income, credit, and savings together to be able to successfully own the place
You basically sign two documents: a lease document as well as an option-to-buy. So you would pay a specific rent fee until you can buy it, and then you would buy it, and that can be through any type of financing; (A-lenders, B-lenders, etc)
What are the benefits to the owner/seller to use a lease option?
Lessee (your tenant) may be required to perform Repairs, so some costs can be saved there.
Lessee option Tenants tend to treat the house better because there is an underlying agreement that the tenant will eventually own the house.
There is an incentive for responsible payments by the tenant since the tenants paid a hefty fee on move-in day already.
There is usually no agent commission upon sale for the seller, since the seller usually finds the buyer themselves here.
Less Turnover and Fewer Turnover Costs: they want to eventually own the property and therefore the likelihood of them leaving is dramatically lower. And even if they do leave, you have a security deposit to hold onto.
A lease option offers numerous benefits to the lessor, but it also offers many benefits to the lessee (the tenant that signed the lease). These include:
- The ability to lock in a sales price
- A home to call their own
- A plan for homeownership
- Stability in the home
Options for the Tenant:
- Ability to lock in a sales price: not only do you lock in the ability to get the property, but you also lock in a future sales price. And this works in the tenant's…