The Advantages and Disadvantages of Lease Options in Real Estate Investing

One of the major ways of getting started in a real estate investing is to make use of the lease option. The biggest advantage that you can avail in such investing method is, control. This method of investment offers the real estate investor with the right to be in control or possess the overall property in spite of offering the buyers to stay in the property for the agreed period of time.

This comes as a benefit for the buyer because; he/she will have the option for purchasing the house after the agreed time period is over. Now that being said, let us delve deep into the lease agreement regulations and factors to be considered for a lease deed in real estate.

The lease option comes along with the combination of two different contracts. The lease part of the contract will be the contract where the owner agrees for letting you make use of their property freely similar to a rent while you pay the agreed amount for a certain period. Within this period, the owner cannot raise the rent, or provide rent to anyone else, nor can the property be sold within this period.

The option part of the contract comes along with the choice for the tenants to purchase the real estate property in future at a certain price. If you decide that you wish to exercise the right to purchase, the owner has to sell the property. This is a good real estate investing scheme for both the buyer and seller.

The option part of contract will obligate the seller to sell the property to anyone else within the lease period as long as the rent is paid, which is beneficial for the tenant as they know that they are secured. And for the owner, it can be beneficial because the complete ownership right is present along with the option of selling it to the buyer or any other customer after the lease period. If the agreement is provided with “right of assignment”, the real estate investor can assign the contract to another buyer for a quick profit.

The lease option in the real estate market involves very little to no money for the investor, because, this is entirely negotiable between the investor and the owner. And also there are a lot of ways in which the option fee can be structured. This can be made on an installment plan, balloon plan or the agreeable arrangement by both parties. The lease option is a much more flexible way of real estate investing than any other methods, because, the more flexible a scheme is, the more successful real estate investing will become.

And no plan is more flexible than the real estate investment. The reason is, terms of agreement, payment amounts, installments; payment dates interest rate, interest only payment and other various factors are negotiated between the buyer and the seller. This is also a low risk investment because, if the real estate property fails to go up to make a profit you can have the “option to buy” expire.



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