Lease and Option Strategy to Make Money with Single-Family Houses

The best part about using the lease and option strategy is that it is relatively easy to market a single-family house that is under lease and option when you are the tenant residing in the property. The fact is, you do not even have to place a forsale sign on the property. All you have [...]

The types of property owners who are most likely to agree to lease their house with an option to buy are usually: 1. Owners of vacant houses. 2. Owners being relocated out of town by their employer on short notice. 3. Military personnel being transferred on short notice. 4. Absentee owners who reside out of [...]

The best type of house to use the lease and option strategy on is a three bedroom, two-bathroom house with an attached garage and fenced-in backyard in a stable, middle-income neighborhood, which is conveniently located near: 1. Medical facilities. 2. Shopping malls. 3. Schools, parks, and playgrounds. 4. Military bases. 5. Office and industrial parks.

As a lessee-optionee, the only way to avoid being a victim in an equity-skimming scam is to require that all lease payments be made directly to a licensed loan-servicing company. For example, the loan-servicing company would take the money they receive from you as lease payments and use it to make loan payments directly to [...]

When you are a tenant leasing property, I highly recommend that you insure your personal property with a renters’ insurance policy. Most renter ’s insurance policies provide coverage against fire and theft to personal property and personal liability coverage for injuries and damages caused by tenant neglect.

In addition to following the negotiating advice that I outline in Negotiate Low-Cost Options and Below-Market Purchase Prices with Property Owners, you must obtain the following six key terms when negotiating lease and option agreements: 1. Two-year lease agreement. 2. Two-year real estate option agreement. 3. Fixed purchase price that is at least 20 percent [...]

Here is a step-by-step outline of the mechanics of a lease and option transaction: Step 1: The lessee (tenant) agrees to lease a property from the owner (lessor). Step 2: The lessee buys a real estate option from the lessor to purchase the property under lease. Step 3: The real estate option grants the lessee-optionee [...]

I highly recommend that you do not let the cat out of the bag by recording a copy of your real estate option agreement in the official public records. In my opinion, recording the entire agreement only blabs the sale price and terms to the whole world, which could come back to bite you in [...]

If you do not get anything else from this chapter, please get this: Always use separate lease and real estate option agreements to document your lease and option transactions. And never, ever use a standard lease-option agreement, which includes both the lease and the option to purchase in the same agreement. That is a big [...]

The lease and option strategy that I am writing about here involves two separate transactions: a straight real estate option transaction exactly like the type that has been covered extensively in this book and a genuine lease transaction in which the: 1. Relationship between the parties is that of lessee (tenant) and lessor (landlord). 2. [...]

I hope that you heed my advice and avoid using the high-risk sublease-option strategy, which I have written about here. Instead, use a low-risk lease and option strategy, which involves buying a low-cost real estate option on an undervalued single-family house that you can lease at a below-market rental rate. This way, you not only [...]

Finally, the standard lease-option that everyone seems to have gone gaga over is a lease-option in name only. In the real world, this is called an installment sale. Why? Because under the terms contained in a standard lease-option agreement, the relationship between the parties is that of debtor and creditor, and not that of lessee-optionee [...]

You also need to know that many equity-skimming scams involve the use of leaseoptions. Equity skimming occurs when a property owner uses any part of the rent, assets, proceeds, income, or other funds derived from the property covered by a mortgage or deed of trust loan as personal funds. In a typical lease-option equity-skimming scam, [...]

Although I know of no case nationwide where a residential mortgage or deed of trust lender has declared a loan to be in default because the borrower signed a lease-option agreement on the property securing the mortgage or deed of trust and promissory note, you need to know that the lender ’s discovery of a [...]

Another very good reason I am not a proponent of the sublease-option strategy is that, for the most part, the only people that sublease-options appeal to are creditchallenged, would-be homebuyers with a track record of being financially irresponsible. These are people who lack the income and creditworthiness required to obtain a mortgage or deed of [...]

The fact of the matter is that most real estate investors are woefully undercapitalized and do not have the deep pockets or cash reserves that are usually needed to subsidize sublease-option deals. Few serial sublease-option investors are around because most people go broke supporting their first sublease-option deal! This lack of operating capital creates a [...]

The main reason I am not a fan of the sublease-option strategy that is being taught today is that it is not financially feasible. In other words, there is just not enough profit in most sublease-option transactions to make them financially worthwhile. For example, under a typical sublease-option scenario, a lessee-optionee would be lucky to [...]

The standard sublease-option strategy being pushed today involves leasing a property and then subleasing it to a tenant-buyer. This requires the lessee (tenant) to become a lessor (landlord) responsible for managing the tenant-buyer. A sublease is also known as a sandwich lease, which is generally defined as: “A lease agreement in which the lessee (tenant) [...]

First off, the risk versus reward ratio for sublease-options is way out of whack! In other words, the risk potential that is associated with using sublease-options far outweighs the profit potential! There are just too many things that can go wrong with a sublease-option deal, which a lessee has absolutely no control over. For example, [...]