Buying real estate with lease options is the fastest and easiest way to complete a real estate transaction regardless if you are the buyer, seller, or an investor. Because these transactions are win-win-win, they tend not to be adversarial as most real estate negotiations are. The seller has a buyer/tenant in place with a vested interest in the property. The buyer/tenant is motivated to keep the property in good repair and stay current with payments. Buying real estate with lease options is a win-win-win for all parties.
Buying Real Estate with Sandwich Lease Options
When an investor is involved,buying real estate with sandwich lease options often becomes the preferred method. This creates the win-win-win scenario. The investor enters into a lease option with the seller with a contract clause allowing him or her to assign the agreement to a third party or enter into a completely separate agreement with a third party. For investors, buying real estate with lease options allows him or her to control more properties with less money invested.
The seller begins collecting rent without becoming a landlord and you, as an investor, find an end buyer to collect a larger lease option fee and begin collecting a little more rent than you pay to the original seller. The end buyer (that the investor also does a lease option with) now has a home without the hassles of qualifying for a mortgage along with the ability to purchase in the near future.
As the investor, you want to work with the buyer/tenant to remove whatever roadblock is temporarily preventing him or her from completing the purchase. By doing this, for the cost of an option fee, you collect a large profit when the house does go to closing.
Investor Benefits When Buying Real Estate With Lease Options
There many benefits to all involved in lease options. In fact, too many to cover in a single article or blog. Here, I cover the benefits for investors. Here's a short list of benefits that come from buying real estate with lease options:
- A top sales price from the end buyer.
- Positive cash flow.
- The largest list of possible end buyers.
- Minimum risk because you're not the owner on the title.
- Few or no commissions and fees.
- No maintenance (the end buyer is responsible).
- A large non-refundable option deposit.
- Profit when the home sells.
You're offering a huge value to the tenant/buyer when you have an attractive financing plan. This translates into the ability to ask for a higher selling price (even in a slow market). Any reasonable tenant/buyer easily understands the concept of trading price for time and value.
Once you have the lease option in place with the end buyer, don't just sit back waiting for them to pull the trigger on the final purchase. You still have skin in the game as an investor. Stay in touch with them and work with them to repair any credit problems to qualify for a mortgage. There will be a specific option period this needs to be accomplished within. To make this work, your option period with the seller needs to be longer than the option period you allow you end buyer.
However, you only need to check in with them once a month to verify they are following the plan you help them put in place. All along, you are making a recurring profit when the rent they are paying to you is more than you are paying to the owner.
Buying real estate with lease options really is the fastest, easiest, and least expensive way for an investor to maximize profits for the least investment.