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What Is Lease Option Investing
What is lease option investing?
Lease options are probably the most misunderstood type of investment.
It has many flavors too. It has many variables in it. But what it is, is that you have a property and you’re leasing it to a tenant who’s also going to potentially buy the property. And how they do that is they have an option to purchase the property. That’s why it’s called a lease option.
Another term for the lease option investment strategy is a rent to own or rent to buy strategy.
It’s called rent to own because the tenant is renting with the anticipating of buying it or owning it in the future.
There are a lot of reasons why people want to do this. The number one reason is people can’t qualify for a mortgage. They don’t have a down payment or enough of a down payment, but they want to own a house. They want to get into a house that’s not in an apartment building.
A lot of the rent to owns, a lot of the lease option deals out there are usually on single-family homes or on townhomes but are not on apartments and are not on condominiums. It allows people to move out of their apartments into a home without having to put down the big down payment or without having to qualify for a mortgage.
The reason why people want to do a rent to own is usually because their family is growing, or they’ve just had a kid.
And so, they want a bigger place for their kid to grow up in. The idea when people do a lease option is that they are going to eventually own it. They will actually pick a property that’s going to be in a neighborhood that they want to stay in for a while.
Another approach is you could do a sandwich lease option. What you do is you go out and you lease the property from a seller so that you don’t actually have to own the property.
You find a seller who would lease it to you and then you sub-lease it to someone else.
Now, there are certain rules and depending on the area you live in where they don’t like this or they don’t allow this, so just be careful about that. I mean, there’s ways around that too.
You can structure the deal directly with the owner, or you can put in an offer to purchase with a deferred purchase. There’s also subject to’s.
There’s a number of creative financing strategies that you can implement to do lease options or to do any kind of acquisition actually.
But with lease options, creative financing seems to be more common just because of the motivation around somebody wanting to lease the property.
Okay, that’s how lease options work.
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