Lease-Option
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When you lease or rent to own homes, you both rent and purchase the home rather that either just renting or leasing a property or purchasing it. Renting to own a home also allows you to rent it out or sub-lease the property with a purchase option if you have an option to purchase as well. In this instance I would acquire control (rather than buy) using a lease option because that gives me the right to close without the obligation to do so whereas I’d prefer to extend an option to rent to own homes to potential buyers because the buyer has the right to purchase coupled with the obligation to purchase the property. This rent to own technique is known as a sandwich option. I lease without the obligation and then they rent from me, which means they have the obligation. You could also rent or lease the property and sell the property on a wrap. When you sell it on a wrap, you will have to convert your lease into a purchase using your buyers’ cash. This means I’ve used my option to lease purchase the home. So leasing and then renting with a ownership option is a very viable way to acquire control of property. Again, remember you are not necessarily going to own the property in some cases, but you are going to CONTROL the property. With this technique, when you rent a property, you find a motivated seller and tell them, “What if I were to guarantee to make your monthly payments over some period of time, of ($XXX) dollars, that would cover all your costs with the property? And, if I were to agree to take care of all the day to day maintenance, then at some point during this period, I were to completely cash you out, is that something we should talk about?” If the seller says, “yes” then you can work out the numbers based on the length of time you can control the property. You then rent the home to someone else for a two-year lease and sell them the Option to Purchase. Why didn’t the original owner do that, you ask? He’s not a transaction engineer! Unlike you, he doesn’t possess the specialized knowledge of rent to own homes and option contracts. Simply put, when we rent to own a home, we rent the property with an option to buy, which is why we say “Rent to Own Homes.” Then turn around and rent that same property to someone else for more money for a shorter lease period, and sell them an option to buy the property from you at a higher price than it is worth right now.
foreclosure
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Some of you may be wondering, “Why would anyone rent a home with an option to purchase? Why would someone pay more than I just paid? Why would they rent it from me for more than I am willing to pay on a lease?” Remember, you are dealing with somebody who is highly motivated to sell. They might be in foreclosure (Free List of Foreclosures!
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) or perhaps they have another problem such as a divorce or job transfer out of the area. Maybe they’re an out of state owner and just don’t want to deal with selling the property long distance. There are many reasons people are willing to sell at lower then market value. This is one of the keys to success for a real estate entrepreneur; you must buy the property below market value! Buying creatively and below market value provides you more options and exit strategies. The more techniques you master, the more tools you can pull out of your tool box to engineer profitable transactions! Every month I go to the mailbox and I find checks from properties that I control. And my name is not on the title so I don’t own the properties, but I do benefit from the control of these properties. YOU DO NOT HAVE TO OWN THE PROPERTY TO MAKE MONEY FROM IT, YOU ONLY NEED TO CONTROL IT! You may be thinking that rent to own homes is too simple and can’t possibly work, but I promise you that all the techniques I discuss are ones that I have personally used and have many clients using with great success. This isn’t brain surgery but you have to know the exit strategies as well as how and when to use each of them.

Check out my video about real estate options.

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