LEASE OPTIONS: LITTLE OR NO MONEY DOWN TECHNIQUES WENDY PATTON
The lease option strategy gives an investor the right
While lease options can build you tremendous
to lease a home and also the right to purchase the
wealth, they usually shouldn’t be considered a
home during or before the end of the lease period.
short-term investing strategy. I define a short-term
An option is a contract that gives an optionee the
strategy as the time that passes from the start of
right to exercise a privilege – and in the case of real
the transaction to completion (cashing out) being
estate investing, it gives the optionee (investor) the
less than one year. A classic example of this
right to purchase property during a contracted
would be a “rehabbing project” (fixing up a home
period of time. It is a technique that involves gaining
and reselling it). The other side of the spectrum
‘control’ of a property, without the total burdens of
would be a longer-term strategy, such as buying a
ownership.
rental property and renting it over many years. I
consider lease options and subject to’s to be in
ALL money made in real estate is made by
the center of that spectrum, usually requiring one
controlling property. Owning property is the most
to three years for the best payoff. However, you
obvious
way
control
it,
can always imme-
to
diately sell the deal
but
to another individual
control is possible
or
without ownership –
investor
for
a
profit; this is what is
and control is what
called
makes the money.
business
It was a dying John
in
the
“whole-
saling.” This can be
D. Rockefeller who
done if you buy the
told all of us his
property at a low
secret to achieving
enough price that
great wealth,
“Control everything, own nothing.” All of the most
you can turn a profit by selling the deal to another
successful real estate developers today utilize
investor at a discounted price.
options, in one form or another.
Visualize this scenario:
It is important to be aware that there are some risks
involved with this strategy (as with all real estate
investments), but there are also ways to minimize
your exposure and the rewards that can come with
this technique truly out weighs the risks. Real
Estate investing is truly the quickest and best way
to build lasting wealth. Many of the world’s
wealthiest people acquire much of their wealth
through investing in real estate.
In every seminar I teach I ask the students, “Who
of you would be willing to purchase a home valued
at $200,000 for $100,000.” Of course all hands
shoot up. Then I continue by asking if they would
still be willing to purchase the same home if the
price was $150,000. Most of the hands stay up.
I proceed upwards with the price increasing the