Down Payment Articles & Advice

How To Lease Option Your Properties

The information in this article is just a tiny sample of what is contained in my 324 page e-book, "$0 Down Real Estate Investing With Bad Credit And No Job!"

To find out more about my book.
http://www.realrealestateexperts.com

You can get the above book AND 6 full months of virtual, *online* coaching with 26 weekly manuals and audios, by going to my coaching site.

RENT VS. LEASE OPTION

There are advantages and disadvantages to renting the properties you own or doing lease options.

The typical person who purchases a home using a lease option, does so because they cannot figure out a way to purchase any other way. This means that they probably have credit issues, time on the job issues, income issues or no down payment.

A typical renter, on the other hand, can be found with good credit and a stable job.

The quality of tenant that you get is the only real advantage that I see with renters. Lease Options have some other real benefits.

First of all, you can get more monthly rent for a home than when you sell with a Lease Option. (typically 10% more than market). This 10% is what you would apply to the Seller's down payment if they do buy, so you haven't lost anything by giving them excellent terms.

Instead of getting a refundable deposit (like you would get from a renter), you get non-refundable option money. I suggest charging about the same as you would charge for the deposit... typically, 1 month's rent.

Check out what is customary in your area. Some areas are getting as much as 5% down on a lease option!

Since it is likely that the tenant will never exercise their option, being able to keep the option fee will cover most of the costs of getting the property re-rented or leased after the current tenant moves out.

You can also sell the home for more than market value... typically 5%-10% more. If they do buy, it will be a good deal for you. If they don't buy, you just go out and find another tenant.

Another nice thing about Lease Options is that you can usually get a longer lease. If the option has a 3 year term, you can get a lease for the same period. Renters, on the other hand, will usually only give you a one year lease.

The longer the lease the better. I suggest that you get at least 1% lease option fee for every year of the option. If they want to extend the option, just charge them additional option money (which they can apply to their down payment)

If a tenant wants to move out before their lease is up, they still owe you the balance of the lease. This protects you and puts you into a strong negotiating position. Any concession you make for them is your decision.

If someone wants to move out before their lease is up, here is what I suggest.

Make them continue to pay their rent until the new tenant moves in. They can either make it available to show before they move out or wait for you to rent it after they move out. Either way, you won't lose money, plus you get to keep the lease option money.

If you are in this situation with a tenant (not folks who are lease optioning), treat them the same way and give them their deposit back if they leave the home clean.
Treat people fairly... just like the golden rule says and it will benefit you in the long run.

One last benefit of Lease Options is that when a tenant believes they are buying a home (rather than renting) they will treat it better. A homeowner is more likely to fix up a property and tries to protect their investment.

I cover this material in *exacting* step-by-step detail in my book.

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If you haven't checked out Joe Crump's "$0 Down Real Estate Investing With Bad Credit And No Job!" yet, go to his web site for full details.
http://www.realrealestateexperts.com
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I have been a real estate investor and a real estate agent since 1986. During that time I have helped many hundreds of people buy and sell real estate and sold a ton of it for myself.

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