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A leasing option is not new, although many people who are thinking of entering the real estate market as a form of investment have never heard of it or do not realize how powerful a tool it really is. Leasing options are a way to invest in real estate without a mortgage and to maximize your potential return on investment if you do decide to buy the home. This is why:
A lease option is an agreement with a landlord to lease the home or property for a specified number of months. This can be six months or even up to two years, depending on what the owner prefers and what you can discuss with him. By doing your homework ahead of time, you can see what the real estate market is like today and what it will be like in the future. Based on these predictions, you must decide whether a six-month or one-year lease option works for you. Maybe even nine months, which is not a common lease term, but it is definitely doable. Homeowners will likely agree, especially if they are having difficulty paying the mortgage. Many people buy second homes thinking they can sell the first and then get stuck with two mortgages when they have trouble selling the first home. These are the perfect people to offer you a leasing option. It allows you to have a window to see if the property appreciates enough to be worth buying without the commitment of a mortgage, and it allows homeowners to have an instant cash injection. It really is a win-win situation for everyone.
When you sign a lease option, you rent for the specified time and then decide to buy or not. That’s the great thing about it – it’s an option, you don’t have to buy the property. Let’s say you rent for a year and the market in that area did not rebound as you thought. You can leave the lease once the lease term ends without worry. The owner is free to obtain another offer to buy or lease.
If the property appreciates, then you can buy the property, and all the appreciation can be turned into profit if you decide to sell the home in the future. If you are getting into real estate investing, there is nothing for sure, there is no way of knowing exactly how much profit you will make. However, with a lease option, you greatly increase your chances of making a profit, with no risk or upfront money. For new real estate investors, this may be your best scenario.