One creative way to get started buying real estate is to use a lease option. The biggest advantage of using rent options to invest in real estate is –control. This technique of investing, fundamentally gives the trader the right to possess — be in control of — and profit from a property without buying it.

A real property lease option contract is a combination of two documents. The rent area of the contract is where in fact the owner agrees to let you lease their house, while you pay them rent for a stated period of time. During the lease period, the dog owner can not raise the rent, rent it to other people, or sell the house to anyone else.

The option area of the contract signifies the right you bought to choose the property in the future, for a particular price. If you opt to exercise your option to buy, the owner has to sell it for you at the negotiated price. The choice area of the contract obligates the seller to sell to you during the option period — but it generally does not obligate you to buy.

You are just obligated to make local rental payments as decided during the lease period. When the lease option agreement is written and structured properly, it can provide tremendous advantages and benefits to the investor. Lease option real estate investing, is a flexible, low risk, highly leveraged method of investing that can be implemented with little to no money. It is highly leveraged because you are able to gain control of a property and benefit from it now–even though you don’t own it yet. The fact that you don’t own it, also limits your individual liability and personal responsibility.

  • Buyer’s Agent fees
  • 3 years ago from Australia
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Only if you decide to purchase the property by working out your “option to buy”, could you take name to the property. The real property investor’s cost to apply a lease option contract with the dog owner requires little to no money out of pocket, because it is completely negotiable between investor and owner.

Also, there are a number of ways the choice fee can be organised. It could be structured on an installment plan, balloon payment or other agreeable arrangement between both parties. To be able to secure the property for purchase at a later date, tenant-buyers typically pay a non-refundable option fee of around 2%-5% of the negotiated future price to owner.

Depending about how the rent option agreement is written and structured, the investor could possibly use the tenant-buyer’s option charge money to pay any option fee owed to the owner. It is low risk economically, because if the house fails to rise in value to produce a revenue enough, you have the purchased the to change your brain and let the “option to buy” expire. Even if your tenant-buyer chooses not to choose the property, you have profited with a positive monthly cashflow from the tenant-buyer’s lease payments, and in advance non-refundable option charge.

Let’s look at an example of a lease with option to buy organized in a way that the investor earnings in 3 independent stages of the investment. 125,000 with an option fee of 2% of the sales price. 155,000 and the choice fee is 4% of the sales price. 1,250 monthly for your tenant-buyer.