Make the Most of Your Investment - Lease Option to Buy Tips

Make the Most of Your Investment - Lease Option to Buy Tips

The lease option to buy is becoming more popular these days given a tougher lending market and real estate market. This aspect of real estate investment offers more flexibility on both sides of the arrangement and allows for buyers and sellers to get creative to make the deal happen.

So What's This All About?

The lease option to buy is an agreement between the seller and buyer where the buyer purchases an option to buy the property at a later date. Until the purchase option time is reached the buyer agrees to a regular lease where they will pay rent to the owner. In addition to this, often the buyer will pay more money every month that will be counted towards the purchase price.

The lease option to buy represents only the right, not the obligation to buy. If the buyer decides they don't want to or can't buy the property they forfeit the right and any money paid towards the purchase. Many tenants sign up for this kind of agreement because they cannot afford or get financing in the first place.

Terms and Conditions

There are many different aspects to this kind of agreement that can be negotiated by the two parties. The term of the lease and when the option can be exercised is one of the most important. Most terms in this kind of deal are from one to three years. Anything longer is very rare. Next, the purchase price of the property must be negotiated. Standard procedure is to either set the purchase price up front or whatever fair market value is at the time of the lease option. If you're on the buyer's side you want to negotiate the lowest possible price and hope the property increases in value later on in the deal.

The option price itself must also be negotiated. You are buying the rights to purchase the property and the seller is forgoing his rights and must be compensated. Also, the amount, if any, of the monthly payment that will be put towards the purchase price should be negotiated.

Things to Watch Out For

In this tough real estate market the lease option to buy may be the only way to make a deal work, but that doesn't mean you should throw caution to the wind. If you're a property owner this situation can make you some extra passive income, but never go into this kind of deal with intentions of not wanting to sell. You must be prepared to part with the property if the buyer exercises their option.

Also, as an owner make sure the tenant has some stake in maintaining the property by putting some of their money aside in the form of a security deposit. If not they buyer may realize they are not going to buy and neglect the property.

POST COMMENT

Argentina Journey Tips Tips On How To Troubleshoot An E-Z-Go Golf Cart Tips On How To Troubleshoot A Golf Cart Switch Tips on Lace Wigs that you did not know Tips on Finding a Trustworthy Locksmith David Morris Survival in Place - Urban Preparedness Tips Review Tips In Choosing An Assisted Living Facility Tips Awareness and Prevention of Breast Cancer Tips On Improving Employee Turnover Tips for Reducing Your College Budget First-timer Hunting Tips Divorce Forms At Your Finger Tips Helpful Tips on Overcoming Panic Attacks