#lease-option

[realtorpegsd]

7 Ways You Can Become a Real Estate Investor

Being a real estate investor is not really that hard, Sometimes you do not need any money down. Other times you do not need any of your own money down. Below are 7 Methods to buy property and earn money.

1 – Buy and Flip

This is a Method where you buy

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[aubenrealty-blog]

Thinking about doing a Lease-Options deal

This why I don't do it. These type deals never work out....

I have met a lot of investors who swear by using this strategy to get deals done, I personally don't like this strategy. Because in my personal experience, these deals never work out the way that you envisioned them.

If you are unaware about what a lease option is:

A lease-option is an agreement between an owner of a property and a tenant. A tenant signs an agreement with a property owner to rent a property from the owner  for "x" amount of years ( typically 2-5 years) and once "x" amount of years has passed the tenant becomes an owner occupant by purchasing the home from the owner.At the expiration of the deal, the tenant has the option to buy the property from the owner for a previously negotiated price.

The way it works:

First, the tenant puts down something similar to a deposit which is called an "option fee." This option fee is a non refundable fee which acts as a down payment for when the tenant evolves from being a tenant into becoming an owner occupant. Next the landlord and tenant sign an contract that says that the tenant will buy the property after "x" amount of years. Typically the tenant has to  pay a rent premium for this type of agreement with part of the rent going towards the purchase of the home.

Lease-Option In

A lease option in occurs when you negotiate to rent a property from a seller and sublet the property to another tenant for a price higher than  what you are paying for rent . You can collect the margins and at the expiration of the contract you purchase the property.

Pros for investor:

This is a creative way to build some capital to invest into more properties.

Cons for an investor:

The major pitfall of using this type of strategy is that you don't legally control the property and it can put you in a very bad situation.

Here is the scenario: 

You sign a lease option agreement with Individual A with the agreement that your rent is going towards the payment of the mortgage. You then sublet the property out to Individual B for a rent the exceeds your monthly rent. Instead of channeling the rent that you are paying toward the mortgage of the property, Individual A decides to pocket the rent.  The property goes into foreclosure and you and Individual B  are without a property. Now, you have to deal with an angry tenant whose wrath is focused at you.

Lease-Option Out  

A lease-option out occurs when you own a property and you get a tenant to sign a lease option for your property.

Check out the rest of this post at: http://www.aubenrealty.com/blog/index.php/434/lease-options-deals/

-Auben Realty Improving Augusta One Home At A Time