Foreclosure Investing and Lease Options

There are a number of ways to finance your start investing in foreclosed homes and buying and selling other real estate. This includes cash transactions, conventional loans and government-sponsored financing.

Often, beginning, and many experience investor overlook or make limited use of option strategies and its ability to help them generate quick and impressive profits for your portfolio.

There is also creative financing techniques that help you gain control of real estate for their investment portfolios, such as lease with an option to buy.

Lease with option to buy

An option to buy gives the real estate investor or personal home buyer an opportunity to buy a property within a specified time period and at a predetermined price. The buyer does not have a legal obligation to follow through and purchase the property. However, the seller has an obligation to sell the property.

This is an effective strategy that many investors combine with a lease and use for situation where the sellers are motivated to sell a home and have little or no equity. This is also an effective strategy when the seller needs to relocate and doesn’t have the time to wait for a property to sell.

Instead of a standard sales transaction, a lease with an option to buy gives the investor control of the home. It can generate cash flow without outright ownership of the property.

Effective financing alternative for variety of transactions

Although the rate of foreclosed homes is down substantially, the lease /option strategy provides a option for a property that is pending foreclosure, seller’s seeking relief from the financial hardships of a the mortgage or sellers dealing with personal situations like divorce or death.

For investors with little or no cash, investing in the right a lease /option deals can not only help them gain control of a property, but make profit each step along the way. It also a common strategy for buyers who cannot qualify for a mortgage because of bad credit or need time to build their work history , save for a down payment or get to know a particular neighborhood before making the investment.

Different variations of lease/option strategy

Many foreclosed home buyers with buy-and-hold exit strategies use this tactic in combination with
timeframes, than assign the option to another investor or a tenant/home buyer. Leasing property to potential buyers provides a more attractive deal than traditional renters.

Often, investors structure the lease so that the lessee (tenant/buyer) must take care of much of the routine maintenance. In addition, they are less likely to damage the home and make the monthly payment on time.

Location important

You should narrow your lease/option deals to desirable neighborhoods. Middle-income and upper-income areas are most attractive to potential home buyers. Safe neighborhoods with good schools, amenities shopping, access to public transportation and low crime rates increase your probability of getting good responsible tenants who have incentives to follow-through on a lease/option purchase.

Not only is this an effective strategy for buying foreclosures, but you can also use it for purchasing small apartment buildings. Buyers who have a small down payment can take control of a property with a lease/option, save money from the cash flow and consummate the purchase in a year or two.

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