How to Use Lease Options and Fixer Uppers
by Sal Vannutini
If you don’t have a large chunk of cash to make a down payment,especially if
this is your first investment property, a least option can help you get into the
game very quickly. The way a lease option works is that you negotiate withowner
for the right to rent the property with the option to buy it at a future date
for a specified price.
If you choose not to purchase the property, for whatever reason, you’re not
obligated to do so. According to the terms of the lease, however; the owner will
be obliged and required to sell you the property for the agreed upon price,
should you decide to exercise that option and right. The beauty of the lease
option is that it allows you to get it on a property very quickly; because you
don’t have to make a down payment and you’ll only be responsible for whatever
monthly lease amount you negotiate with the owner.
During the time frame that you lease the property, you can use the funds you do
have to renovate the property and locate someone to purchase the property at a
higher selling price after it’s renovated. A word of caution here,however. When
you negotiate with the current homeowner and sign the lease, it’s imperative
that you insure the lease contains a “Full Right of Assignment” clause. Without
this clause you won’t be able to do anything to the property, including locating
a new buyer, without his or her approval.
Another few tips about the lease option. While you won’t have to make a down
payment, you will typically need to pay the existing homeowner an option fee.
This is generally nowhere near as expensive as a down payment and is usually
about a hundred bucks or less. This is a compensation fee of sorts for the
homeowner agreeing to sit on the property, more or less, and sell it to you
should you decide to buy it. In essence, you’re paying the homeowner for time.
The lease option must also contain the price you and the homeowner have agreed
upon, should you decide to purchase the property. Finally, most lease option
contracts contain an expiration date. This means that you will have up until the
stated expiration date to either purchase the home or walk away.
Remember, you’re not obligated to purchase the home within that timeframe, but
if you don’t and the expiration date passes, the homeowner is no longer
obligated to sell the property to you for the agreed upon price. When a lease
option is carefully negotiated, it gives you the full legal right to make
renovations on a fixer upper property, find a new buyer and sell the property;
even though you were never on the title. This is a very good way to make several
thousands dollars pure profit and the only money you will be out are the
renovation costs, option fee, and whatever you paid in rent for the duration you
leased the property.
Bio:
Sal has successfully renovated real estate for both personal and investment
purposes for over 10 years where he has bought, renovated and sold over 40
properties and build up a substantial portfolio.
His knowledge and expertise in renovating is based on the many lessons learned
from his hands-on experiences; as well as his many years in the real estate
industry where he has helped clients to do the same with his private workshops
and mentoring.
His application of the "buy and renovate" strategy gave him the option to stop
working full-time at the age of 35. At the time of writing Sal has just turned
40 and had retired from full-time employment. He now lives his "perfect" life
and divides his time between his renovation projects, as a private mentor to his
clients, as a public speaker, traveling the world and "hanging out" with his
wife and children.