Here is one of the little know real estate investing secrets; a lease option or, as it is more commonly referred to, rent-to-own, is a process of buying real estate that works well if you do not have a lot of money to work with. A lease option allows you to have a fairly small down payment. You make monthly payments which go towards the purchase of the property. This is often used for situations where buyers do not want to get or can’t get a loan through a conventional lender.
Details of Leasing
When you are in a lease option deal, the owner of the property can’t sell it. You both agree to a contract that states you are buying the property. The agreement will outline the monthly payments, the term of the agreement and any final payment options or actions that will take place once the deal is finalized and the purchase is completed. Once the agreement is executed you, the buyer, become responsible for it. You will have to keep insurance on the property and make any repairs.
When you are drawing up your lease option agreement you should pay close attention to the details about sub-leasing. Here’s where the real estate investing secrets start to emerge. In some cases a seller will insist that you agree that you and only you will occupy the property until it is sold. If you are interested in investing then this probably will not work for you. The better option is to make sure that you are allowed to sub-lease the property. Sub-leasing means that you rent out the property to someone else. That person is just a renter. You are still considered the buyer and you become the landlord.
Important Point to Keep in Mind
With leasing, the monthly payment you make may be more than you would pay on a typical home purchase. This is because the seller may include extra costs to cover their risk. Generally the payment amount will be based on the mortgage payment being made by the seller and have some additional amount added to it.
If your intentions are to sub-lease, then it is very important to make sure that you can rent it at a reasonable rate. You will need to check rental rates in the area. In order to make money off the deal, you will have to charge more than you are being charged. Do some figuring to see how much you can make off the deal.
Determining a Good Deal
Generally speaking sub-leasing can be a great deal for you. You are able to build credit through the original lease, while also making money. As long as you can find a good renter, you can end up with a good deal. You will not be paying anything since you will be charging your renter the cost of your lease payment plus a little extra that can go right in your pocket.
Just make sure that you are getting and creating good deals. Go over your lease agreement carefully. Make sure that you can sub-lease. Find a good renter that has good credit and good renting history. Be sure that you are smart about your leasing and sub-leasing and in the end you could have a great investment on your hands. Take all of these steps and you can take advantage of one of the top real estate investing secrets to be found.
To your success as you uncover the top real estate investing secrets!