What Should I Have Before Entering A Lease Option

I want to begin investing with lease options. Is there a good course to help find sellers and what to look for? How to ask for the lease option contract? Is there a calculator to help determine those deals? I've ben to a couple or REI courses who touch on the subject, but I'm a little on edge to enter until I'm fully comfortable with getting the deals up front. The selling I think would be a little easier...
Thanks for any infor you can provide! 8-)

Comments(3)

  • edmeyer7th December, 2004

    If you are looking to acquire with a lease option, one technique is to answer ads on property to rent. You approach the landlord and say that you want to rent and that if you like the place, you may want to buy it. Ask if the landlord is tired of managing his property and offer to manage it (i.e. put a tenant in).

    You also may find people willing to lease option to you if they have had the property on the market for some time and it is not selling.

    You can certainly use a spread sheet to calculate cash flow or leverage on a lease option. Keep in mind that lease option terms are whatever the parties agree to. There are two components of payment-- the lease and the option consideration. You can have some or all of the option consideration go toward down payment or price reduction if your seller agrees.

    I hope this is of some help.

    Regards,
    Ed

  • Olraz8th December, 2004

    Great advice. However there are calculators out there that claim to help determine the right type of option for the deal. Such as hold or sandwich. Do the calculators help much?

    Also when i finally l/o the property out how does a tenant or potential buyer qualify? Do I qualify or don't i really care as long as the payments are there and the up front money is paid to me?

    thanks for your help

  • edmeyer8th December, 2004

    I am not sure how such a calculator would work. It seems to me that the lease option agreement is the deal. What I would do would be to run numbers under several scenarios and then start making offers for the scenarios that are acceptable and profitable to you.

    Your lease option tenant is essentially a tenant and should be screened as such. The main reason a tenant would be attracted to a lease option is because their credit scores prohibit a favorable (or any) loan or they have no money for a down payment. Statistics are not favorable that things will materially change during the option period and, therefore, many options are not exercised.

Add Comment

Login To Comment