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Lease Option Techniques: For Real Estate Investors, Home Buyers, or Home Sellers

Lease Option Techniques: For Real Estate Investors, Home Buyers, or Home Sellers

Lease Option Techniques

As an investor or home owner, the lease option is a popular method to sell property and gain profits. These lease option techniques are provided to assist both the buyer; the seller; and for the investor, such techniques as the sandwich lease and flipping lease options. There are several lease option techniques, all customizable to your specific situation.

As the Seller, here are some lease option techniques to consider:

  • Consider owner financing as a lease option technique especially if the tenant is motivated, but simply may have trouble getting conventional funding.
  • Require an option fee from the tenant. Requiring even few hundred or a few thousand gleans out those buyers who are less motivated to exercise the option.
  • Consider contract terms such as maintenance and repairs; subletting, one of the popular flipping lease options; and extending the option deadline.
  • The lease option can be a complex document and combines aspects of both the conventional sales and lease contract. Consider a real estate attorney to assist you.

As a Buyer, here are some lease option techniques:

  • Set up an escrow account to protect your funds should the owner not honor your option. Most owners are honest, but why take the chance.
  • Start early to secure financing, especially if you need to clean up your credit. The more time you have the better. Remember, in most cases you won’t get your money back if you don’t exercise your option.
  • Ensure you agree with contract language to maximize your lease option techniques.
  • Include a clause to assign the lease to a third party, if indeed you cannot find financing, you can assign it to someone who has.
  • Have the document notarized and record it in public real estate records to encourage the owner to honor the option.
  • The right to extend the option deadline gives you a cushion should the final closing day approach before you’re ready with financing.
  • Consider sharing costs of maintenance with the seller, since you both have interest in keeping the property in pristine condition.

Flipping lease options generally consist of the investor locating another buyer to exercise the option before the option is due and flips the property.

Or consider constructing a sandwich lease. The investor sublets the lease option to a buyer and when the buyer is ready to exercise the option, you do the same simultaneously. You are in the middle of the seller and buyer, hence the term sandwich. The trick to utilizing lease option techniques, specifically flipping lease options is the timing in locating a seller and a buyer.

Lease option techniques to find a buyer?

  • Run ads and list the property “rent to own” or “great fixer-upper” if the property is in need of improvement.
  • Find a buyer that has “fixer-upper” skills.

Lease option techniques to find a seller?

  • Read foreclosure listings and real estate ads, in both for sale and for rent sections especially if you are exercising flipping lease options.
  • Contact sellers with old listings. The sellers may be motivated to consider lease option techniques that they may not have considered before.