True wealth in real estate is created when you hold properties long-term. That may or may not be in the cards for you right now but there is a way to cut your teeth on this concept with a type of deal that pays you quickly, pays you monthly, and that can pay you down the road too. This seemingly miracle deal is better known as a lease option.
Lease options are a form of owner financing, whereby the seller becomes the bank. You can lease option properties from motivated sellers, which is a nice low risk way to get into real estate deals when you are getting started in the business.
Lease option, as a strategy, also has a nice place within the realm of apartments, which is more my specialty niche in this business of real estate. Think about it for a moment. What is the most limiting thing out there right now for the would be homeowner? You guessed it..available financing. The crumbling of the mortgage industry over the past few years has sealed up many financing options for consumers and increased frustration levels for hard-working people who would love nothing more than to own their own home.
It’s often said that wealth is most often created by capitalizing on the mistakes of others. If the mistake in this case has resulted in a mortgage industry that is anything but user-friendly, then the opportunity for you is to become the bank. Imagine a motivated seller who owns a four-unit apartment building. They are desperate to sell and need to just walk away.
You can secure the deal by taking over their payments, agreeing to a purchase price that will be paid at a later date, and giving them the peace of mind that their situation is covered. But you don’t stop there. Instead of simply renting the units, you could offer owner financing to a buyer (via a lease option), giving them the opportunity to either move into one of the units and rent the other three or simply rent all four.
How do you make money? You’ll get cash up front from the new buyer. You’ll have a monthly income margin that you’ll earn until the buyer secures permanent financing. You’ll also sell the property for more than what you agreed to buy it for, creating a back end profit that can also be substantial. Three pay centers on a deal that makes sense for everyone involved..it doesn’t get much better than that!
