Overcoming Real Estate Investing Obstacles With Lease Options
While credit has become more widely available since the earliest days of the real estate market collapse, loan approvals and credit availability are still two of the biggest challenges that real estate investors face. As a result, creative financing techniques are growing in popularity as investors search for alternatives to traditional financing. Lease options appear to be the vehicle many investors are turning to in their quest to acquire properties and start or expand their real estate empires – large or small.
Because the economy in most parts of the country is still in a shambles, motivated sellers abound. Savvy real estate investors can tie up a property with a lease option – a type of real estate transaction that allows a potential buyer to agree with the seller on a future price to be paid for the property if they exercise the option to purchase during the contract period (usually between one and three years).
This is good for the real estate investor because they can (assuming the lease option agreement allows it) lease the property to a tenant who will either pay rent on a monthly basis or will enter into their own lease option agreement with the investor. The investor will make money on the spread between rent charged (and option consideration) paid – with the promise of additional income if their tenant exercises the option to purchase.
While there’s a lot that goes into having a proper understanding of lease option real estate investing, this is an exciting technique in today’s tough credit environment. The thing to keep in mind is that if the market improves and property values rise, the investor has the potential for a strong profit when the option is exercised (and the property sells). However, if the market falls in value, they can walk away from the deal after forfeiting their option consideration – and still get to keep the monthly rental income they enjoyed during the option period.
Tough credit conditions don’t have to mean limited real estate investing options. Lease options make it possible for a smart investor to take advantage of the opportunities available in today’s real estate market.