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Investing in Real Estate, 7th Edition by Gary W. Eldred, PhD

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9

MORE TECHNIQUES TO PROFIT WITH PROPERTY

Either independently or along with creative renovation, you can employ these popular techniques to profit with property:

  • Lease options
  • Lease purchase
  • Conversions
  • Master leases
  • Assignments of contracts

LEASE OPTIONS

Many tenants would like to own their own homes. Yet for reasons of blemished credit, self-employment (especially those with off-the-books income or tax-minimized income), unstable income (commissions, tips), or lack of cash, they believe that they can't qualify for a mortgage from a lending institution. For these renters, the lease option (a lease with an option to purchase) solves their dilemma. Properly structured, the lease option permits renters to acquire ownership rights. Simultaneously, it gives them time to improve their financial profile and eventually meet the underwriting standards of a bank.

The lease option also works well for beginning (or even experienced) investors—especially in tandem with a fix-and-sell strategy. Suzanne Brangham, the author of Housewise, began her rehab career when she acquired a condominium through a lease option agreement. As you read the following, you might picture yourself as either the person who wants to acquire a property or an owner who wants to sell a property.

Here's How Lease Options Work

As its name implies, the lease option simultaneously creates two contracts: (1) a rental agreement and (2) an option to purchase agreement. Under the lease, the tenants sign a rental contract ...

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