This article will change your entire perspective towards real estate investing!
There are hundreds of creative real estate techniques out there to choose from. No doubt you'll recognize a few from the following list of winners: Buy low - sell high, find them, fix them, farm them, forget them, sweat equity (yuck) and who could forget the all time favorite Nuthin' Down -Nuthin' left!
With such a vast selection from which to choose, which technique is the most logical to use?
There is one strategy that will allow you to profit up front in real estate every time and best of all there are NO BANK OR ANNOYING FINANCING & QUALIFICATION PROBLEMS. You don't have to risk your savings, there are no taxes to pay, and no micro management of tenants & toilets. You're probably thinking that no such investing exists and that Claude must have a very wild imagination!
If you've never heard about it, then it is time for you to learn about the best money making method in real estate. It has many names including, Lease Purchasing, Renting to Own or Leasing with an Option. Whatever you call it, to the informed investor who understands the concepts and strategies of Lease Purchasing it can mean consistent cash flow. With this method, anyone can control real estate that generates immediate profits without having to become a real estate expert or by having to look at hundreds of houses. If you know how to rent, have a little horse trader in you and have the correct contracts then you can be a Lease Purchase Investor. Imagine putting together all kinds of profitable cash generating transactions in your home office. You can sit in your running shorts all day (I do live in Southern California) with just a telephone, a good cup of StarbucksĒKona Coffee and an understanding of the concept and the power of options.
Why Lease Purchase?
Why not? Controlling real estate through Lease Purchasing whether it's for your own home or with an investment property, is by far the superior method of creative finance. Lease Purchasing helps to remove the traditional adversarial relationships that exist between buyer and seller and produces greater profits with less risk.
In most real estate transactions there is a natural tendency between the buyer and seller to try and beat each other up. One wants a lower price and the other wants a higher one. Hours and days can be spent negotiating all of the terms. Next come all of the difficulties associated with deposits, qualification, appraisals, title companies, lenders, escrows, lawyers, etc., etc. Lease Purchasing eliminates these problems and lets the buyer and seller have a win-win experience and get the deal done.
A Lease Purchase is a process where a rental agreement is combined with a purchase or more specifically, an option contract. Price, length of contract, escrow instructions, rent credit and other pertinent terms are all negotiated in advance. The tenant/buyer has a percentage of his rent credited to the down payment or off the price. In many cases, more money is being applied monthly than an actual mortgage payment would be to the principle if you out and out purchased the property.
There are three main parties that can become involved in a Lease Purchase.
This is a renter who can't purchase a home through traditional means or who is just not ready to commit (or one who is a smart cookie). This buyer may not have a large enough down payment for a bank loan, may have minor credit problems, a new job, a high loan to debt ratio or other reasons that make a traditional purchase of a home impractical (impossible) at this time. Most buyers are aware of the advantages of home ownership (tax shelter, appreciation, security, etc.) and are eager for a chance at home ownership, thereby getting out of the rental rat race. Our buyer can lock in the future purchase price even though ownership may not transfer for a year or longer. A percentage of the rent can be credited toward the down payment or off the price. During the terms of the contract, the tenant/buyer has time to check out the house, the neighborhood and to obtain the best financing.
If you are a seller and the market demand is very low for your property, the best way to get your full asking price would be to Lease Purchase your home. Since you are being flexible on your terms you are entitled to get your full asking price and a higher than average or premium rent for your property.
When you find a prospective buyer/tenant you normally receive option consideration. This is a nonrefundable amount that in many cases can be several months rent. If and when the buyer wishes to exercise her option, you will receive your profits when escrow closes. If the buyer, however, allows the option to expire you also win since you can begin the whole process all over again and either renegotiate the contract or find a new tenant. In either case, you receive more option consideration for the same property. If the property sells, then you use some of your profits to reinvest in another house. The potential for profit for the seller is fantastic since a well negotiated deal will always reap profits at every stage of the Lease Purchase.
The Lease Purchase has everything an investor needs to make prudent, profitable investments in real estate. Utilizing the principles of leverage an investor can control properties that normally require 10-30% down without using a lender nor going through the loan application process. The investor can profit by utilizing techniques such as subletting, assigning, quick flipping, creating paper, and consulting on individual transactions.
The Lease Purchase
Lease Purchasing is the absolutely best way for the beginning or seasoned investor to be involved in creative real estate. It can generate high profits and carries minimal risk and investment. It is a Win/Win concept for all the principle parties concerned and it's a true niche in a world of so many eclectic real estate techniques. Best of all, Lease Purchasing can make you money while being fun.
Diamond Consulting Group
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