Having an option gives the holder the right to buy or sell something at an agreed price after an agreed period. The holder usually pays a premium to be granted this right, but is not obliged to exercise it. Lease options on property are already popular in the US and other overseas markets. So how does it work?
A lease option agreement involves a tenant being given the option to buy a property at an agreed price at the end of a given rental period, usually three to six years. Take first-time buyers Fran and Fred as an example. They agree to the lease option, Fran and Fred can sleep easy while other property prices move further and further out of their grasp.
Agreeing a price in advance makes it easier for buyers to plan financially and save for a full deposit. Another bonus for the renter-buyer is avoiding the nasty business of buying property on the open market. They can provide a place to live at a guaranteed price and time to sell your existing property. This is useful if your property is slow to sell but you need to relocate quickly.
A lease option is not completely risk free though. It only saves buyers money while prices are rising. Lease option agreements can appeal to sellers too. They are best suited to buy-to-let landlords who own a number of properties they may wish to sell in a few years time.
Sellers who need an immediate sale to buy another home i. Think wine-stained carpets, blocked sinks and car tyres in the garden. Longer rental periods also allow landlords to avoid costly gaps between tenancies when a property lies empty. Can I ask why you want 'ready-made' lease option deals? Does the location of the property matter? Are you only looking for sandwich deals or are you open to deals where you need to find the tenant? I need to give that a bit of thought Hi John, I'm about to embark on looking for my own deals but, having not done it before, realise it may take a while before I successfully complete one.
I have a preference for Scotland at the moment. I'm open to sandwich deals or those where I have to find my own tenant. REI said: Can I ask why you want 'ready-made' lease option deals? Caroline, As many realize the legal system in Scotland is different so make sure the lease and option agreements being used are correct for Scotland.
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Some investors selling on deals go a bit light when it comes to the paperwork. They are selling it on so they do not have the same concerns about the quality of the documents. Second thing to watch out for is the actual deal. Lease option agreements allow for a lot of customization in terms of what is agreed. This is great for the buyer and seller. If one is purchasing a deal already set up by a middleman who is going to move on make sure the deal is what you really want. Run though your mind what could go wrong and decide if the agreement addresses the situation in the way you prefer.
People who are selling on deals sometimes do not think threw the downside when they promote their goods.
5 lease option strategies
They see the positive but do not plan for the negatives that might happen over the full length of the lease option agreement. Caroline I have one at the moment that might interest you. I am sourcing these deals all the time. I think Lease Options are the way forward in I would suggest you do a lot more research on them as there can be many different ways to structure a deal Details on my web site.
Why wouldn't I just rent it myself? Why wouldn't I just list it? Why don't you just get a mortgage and buy it now? While motivated sellers tend to ask how fast you can solve their problem and what the next step is: 1. When can we get started? What information do you need from me to make this happen?
How to Structure Your Lease Option Deals
Angela Hagen ,. It's a great business model to make cash now, cash monthly and sometimes and most often more when the buyer gets their own loan. We are experiencing that now as we've been doing this model since Doug Pretorius. If they ask this question, one could in turn ask if they understand how to market to tenant buyers, screen them, or know the logisitics involved in setting them up for loan approval before the end of the option on the lease?
Am I missing anthing? Tim Ivory Sure you can try that. I don't bother to try to convince anyone anymore. This week I pitched RTO to 5 sellers. In Canada all mortgages are ARMs by the way. I could have dug deeper and tried to figure out if there was some way we could swing it, but why? I just wished him luck. And 1 was interested, already thinking about doing an RTO , already had a rent amount in mind.
He asked if it's for me if I'm going to live there myself I said "I specialize in setting up RTOs for families who are looking to put down roots here.
Alright then. Can I call you back tomorrow? I'm in the middle of a BBQ, but I'd like to discuss it further. That was Thursday evening.
He hasn't called back, but this is Canada Day weekend so I didn't really expect it. If I don't hear from him by this Thursday I'll do a follow up and see if he changed his mind or if he wants me to swing by and have a look. Either way I'll just keep pitching a seller or 2 every day and by the end of the month I should have a deal or 2. Join the millions of people achieving financial freedom through the power of real estate investing. If you signed up for BiggerPockets via Facebook, you can log in with just one click! Log in with Facebook. Full Name Use your real name. Password Use at least 12 characters.
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What is a lease-option-to-buy?
Forums Arrow Rent to Own a. Start a Discussion. Thanks Larry. Rotate Log in or sign up to reply. Are you looking for retarded seller?
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Something to that effect. Don't get too detailed by phone or e-mail as Brian mentions. Originally posted by Karen Reynoso : Brian Gibbons I would like to know how you approach sellers being licensed.