Lease Options for Real Estate Investing

A lease option is not new, though many people who are thinking of getting into real estate as a form of investment have either never heard of it or don’t realize just how powerful a tool it actually is. The lease options is a way to get into real estate investment without a mortgage and to maximize your potential return on investment if indeed you do decide to purchase the home. Here’s why:

A lease option is an agreement you reach with an owner to lease the home or property for a specified number of months. This can be six months or even up to two years, depending on what the owner prefers and what you can hash out with them. If you do your homework in advance, you will be able to see what the real estate market looks like today and what it will look like in the future. Based on these predictions, you should then decide if a lease option of six months or a year works for you. Perhaps even nine months, which isn’t a common lease term but is definitely doable. The owners probably will agree to it, especially if they are hard up for money to pay the mortgage. A lot of people buy second homes thinking they can just sell the first and then get caught with two mortgages when they have trouble selling the first home. These are the perfect people for you to offer a lease option to. It allows you to have a window to see if the property appreciates enough to be worth buying without the commitment of a mortgage, and it allows the owners to have an instant cash infusion. It really is a win-win situation for all involved.

When you sign a lease option, you lease for the specified time then decide to buy or not. That’s what so great about it – it’s an option, you are under no obligation to actually buy the property. Let’s say you lease for a year and the market in that area didn’t pick up like you thought. You can leave the agreement once the lease term is up without worry. The owner is then free to get another offer of purchase or lease.

If the property does appreciate in value, you can then buy the property, and all the appreciation can become profit should you choose to sell the home at a future time. If you are getting into real estate investing, there is no sure thing, no way to know exactly how much profit you will get. With a lease option though, you greatly increase your chances of making a profit, with no risk or money down initially. For new real estate investors, this may be your best case scenario.