As far as living arrangements are concerned, leasing is not as popular as owning, but it has its appeal, as you can either rent over three, six or twelve months or any other predetermined period. Another reason for their popularity would be lower rates relative to monthly rent. But an individual may often be offered a “Lease Option” when they are seeking to lease. Lease options work essentially the same way as standard leases, but in this case, you would have a choice to purchase the property at a future date.

Here’s the thing about an option — it’s an option. Some renters might find this as the option, no pun intended, for them, while there may be others who have other plans. Because there is a fee required to commence purchase of the option, this again reinforces the fact that it is just that, nothing more than an option. The amount of this fee may vary, but in any case, this is an up-front fee that gets paid when accepting terms of the lease. Usually, you would be offered a lease option when the real estate market is slow; if, on the other hand, the market is picking up, most property owners would be wont to sell their property.

A lease option has some advantages, but then again, it also has a good number of disadvantages as well. The most obvious disadvantage is the fact a lease option is rarely exercised, if at all, thus money being flushed down the commode. Many people pay the money thinking they will buy later and then either lose interest or find they can’t qualify for a mortgage. Or they simply lose interest — in any case, you cannot recoup the money you had spent to purchase the option, and you would most likely be hunting down that man on the street who sold you whatever you had been smoking when you made that purchase.

An area where a lease option is commonly used is real estate investment. In this example, a person investing in real estate would attempt to “flip” a home in due time, then realize profit. The lease option would generally appeal to them because it would allow them to secure the home without a sizeable cash requirement to close the deal. Once they purchase the option, they then start hunting for a buyer that will pay more than the seller is looking for in the original sale. If the investor is able to succeed in this endeavor, they now have the right to buy and sell to the other party without delay. Here’s the thing — most of the time, these two transactions will coincide with each other! This leaves the investor with a smile on their face and the original seller in a grumpy mood.

Lease options are like most anything in life, as they have a good side and a bad side. If you are an investor, it is a worthy and sound decision as it might free up cash flow in most cases. But it is hardly ever the best thing to do for individuals who want a permanent residence for themselves and their family.

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You have to increase your odds by finding more deals if you really want the best deals in investment properties. Who is more likely to get a cheap apartment building, an investor that looks through the MLS listings and calls it a day, or the one that uses ten resources? Here are the ten:

Talking.

The properties will sometimes come to you if you let people know you are looking. There are a lot of owners out there who want to sell, but haven’t yet listed their property.

Using the Internet.

When you go to a search engine, enter the type of real estate you are looking for together with the city you want to invest in. Who knows what you’ll find.

Look for ‘for sale by owner’ signs.

Often, owners don’t want to pay to keep the ad in the paper which means not all properties are in there.

Find abandoned properties.

This is a clear sign that the owner doesn’t want to deal with the property. He might end up selling it cheap.

Try finding old ‘for rent’ ads.

Call if they are a few weeks old. Often ready to sell are landlords especially if they haven’t rented the units out.

Talk to bankers.

You might get a foreclosed-on investment property cheaper if you buy it before they list it with a real estate agent.

Offering a finder’s fee to someone.

There are people that always seem to hear about the good deals. Try to have these people come to you.

Eviction notices.

If you can get information at the courthouse or if your local papers publish eviction notices, then it can be useful. A landlord who just went through the process of evicting tenants is a likely seller.

More on old FSBO ads

If you call on two-month-old “For sale By Owner” ads, and they haven’t sold, they may be ready to deal. Help them out! Owners would still love to sell even if they have already given up the effort.

Put an ad in the paper.

To generate a few calls, try putting the words ‘looking for investment properties to buy.’

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Most people know what ‘rent to own’ means. Places such as Prime Time and Rent A Center have built an empire with rent to own merchandise, although the buyer normally ends up paying double what the merchandise is actually worth. But even if this works great for someone who has severe problems with their credit, it would not be the best route for most of us. The same applies to homes, if you are thinking of renting a home to own it.

Rent to own might work for a short time, but it will end up costing you more in the long run. The catch is that merchandise you can have for a few dollars a week sounds very cheap. The agreement is normally for around 15 – 20 months, which is where the company makes their money. But, even a few dollars a week add up to a lot if you factor in the amount of time, often up to twice what the item is worth.

Aside from paying the rental fee, you are also responsible for sales tax. And just like merchandise, rent to own real estate can be a little tricky as well. While it is probably the only way someone with bad credit can buy a property, it doesn’t work too well for the rest of us. You’ll still have to pay back your lender with a mortgage, although that amount won’t be nearly as high as it would if you decided to get a house on a rent to own basis.

In most cases, rent to own houses are put up on the market by the owner. This way, you’ll deal directly with the owner. It will start out as a traditional lease, then proceed to a rent to own basis if you decide you want to keep the home. You and the owner will then work out an arrangement, which will normally be quite a few years. Some owners are going to be willing to work with you, and they will go to great lengths working out a price that will be satisfactory for both of you, while others will try to charge you more just to make an extra profit.

If your credit isn’t good, then you might want to consider rent to own as one of your only options to buy a property. Even if the price is sometimes prohibitive, some people prefer rent to own to just renting an apartment. With rent to own houses you are paying money towards the home, instead of just paying rent. In some cases this is fine, although you should make sure to double check with the owner before you agree or commit to anything. This type of clarity will allow you to know how much the home will cost you in the end, and for how long you will be paying to own it.

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