Lessons Learned from Years with Homes

Important Aspects on Lease Option in Real Estate Investment|Things to Consider on Lease Option in Real Estate Markets|Getting to Know The Essentials on Lease Option in Real Estate Investing Once again rental or better known as lease option is starting to get more attention in the real estate business. Due to the market decline of real estate ownership in recent years, leasing has become a trending option and seems to be working potentially in areas where this form of option never worked before. It is imperative that any potential investor interested into lease option must first understand some vital considerations in leasing which could help a lot in making a better decision to rent or not. It is known as lease option because it combines rental lease and a contract option to purchase and own the rented property by the rentee at an agreed price or better known as “strike price” and on a specific expiration date. An investor can benefit from lease option by having his property leased out to an end-buyer with an option to own or offer lease option to the original seller and also re-lease the property to the buyer. These are the following gains that an investor can obtain in a lease option investment: the rent differential which is paid to the original seller and end-buyer, non-refundable fee which is not necessarily a deposit, and the profit taken when the buyer purchases the property.
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With these projected sources of income, an investor can still profit even if the end-buyer decides not to buy the property since the non-refundable fee is forfeited to the investor.
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The first thing to act upon in a lease option with an end-buyer is to separate the lease contract from the option agreement. It is of an advantage if two separate contracts be performed to protect the right of the investor to legally evict the buyer in case of a conflict where the investor can rightfully use a single document in court. With a single lease option document, the court will likely order the tenant’s option consideration to be given back and, at the same time, allow him to break the lease agreement. It is therefore wise as an investor to conduct a single lease option document to the original seller but transact for a dual contract to the end-buyer. Other key considerations in this lease option agreements are the following: an increase every 12 months of 3% to 5% of the strike price, terms of the contract should be annually and amended every 2 or 3 years, repair charges are to be shouldered for costs below $2,000 by the end-buyer and above $2,000 by the original-seller, property insurance for casualty losses should have co-beneficiaries coming from the investor and original-seller, rent amount to original-seller must be computed at 6% of the strike price while rental to the end-buyer must be based on the mortgage expense, and a clear policy as to when the rent starts.