Loading...

What Is a Lease With an Option to Purchase?

Real Estate Investing and Lease Options

For investors flush with cash and tired of the ups and downs of the financial markets, real estate presents a compelling way to earn regular income. From the homeowner who decides that it’s the right time to try seller financing to the investor interested in exploring the world of rental properties, opportunities abound.

A homeowner who doesn’t have a mortgage or whose mortgage is nearly paid in full should consider offering private financing to a well-qualified buyer. Some who can’t qualify for traditional financing – such as the self employed or those who recently graduated – may make good bets. These buyers pay higher than average interest rates and offer a unique income opportunity for sellers. Plus, they take away some the headaches of homeownership (but not the tax advantages). Keep in mind that this only works if you can afford a new home without having to sell the old one.

Rental properties offer another compelling investment argument. Many investors buy foreclosures at rock-bottom prices and convert them to rental units. Some savvy investors advertise their properties as rent-to-own, collect a nonrefundable option fee at the front end and sell the home at a significant profit at the end of the lease.

Not into the landlord gig? Try investing in a tenant-in-common (TIC) group. For the investor who can’t afford to purchase an office building but still wants the income of a commercial real estate investment, TICs offer a nice alternative. Plus, the Internal Revenue Service treats TICs as real estate and not a partnership – very favorable for tax purposes. On the down side, TICs – like other real estate investments – are not liquid.

Before you invest, vet your partner thoroughly. Don’t be embarrassed to ask for (or submit to) a credit check, and expect some personal questions about your own financial practices. While real estate can make a terrific passive investment, it only works when both partners honestly assess themselves and each other.

Ask a local Homes & Land Realty Expert any questions you may have about the home buying process or begin your new home search now by reviewing our homes for sale .


More tips like this one ...


Advertisements