Lease and Option Strategy to Make Money With Single-Family Houses

Lease and Option Strategy to Make Money With Single-Family Houses

Most Investors Don’t Have the Cash Reserves to Subsidize Sublease-Options:

The fact of the matter is that most real estate investors are woefully under-capitalized and do not have the thorough pockets or cash reserves that are usually needed to subsidize sublease-option deals. Few serial sublease-option investors are around because most people go broke supporting their first sublease-option deal! This without of operating capital creates a domino effect whenever there is any kind of financial emergency. For example, when a tenant-buyer fails to pay the monthly sublease payment, the lessee usually has no money to make the lease payment to the character owner, which forces the owner to begin eviction proceedings against the lessee for nonpayment of rent.

This in turn forces the lessee to start the eviction course of action against the tenant-buyer for failing to pay the rent. And if the lessee cannot come up with the money to pay the lease payment, the lessee will end up losing the real estate option, and the only thing he or she will have to show for their time, effort, and money will be an eviction on his or her record.

The Standard Lease-Option Agreement Violates the Due-on-Sale Clause in Loans:

Although I know of no case nationwide where a residential mortgage or deed of trust lender has declared a loan to be in default because the borrower signed a lease-option agreement on the character securing the mortgage or deed of trust and promissory observe, you need to know that the lender ‘s discovery of a leaseoption agreement can cause the due-on-sale clause contained in residential mortgage and deed of trust loans.

Many Equity-Skimming Scams include the Use of Lease-Options:

You also need to know that many equity-skimming scams include the use of leaseoptions. Equity skimming occurs when a character owner uses any part of the rent, assets, proceeds, income, or other funds derived from the character covered by a mortgage or deed of trust loan as personal funds. In a typical lease-option equity-skimming scam, a character owner collects an option fee and security place upfront and then collects lease payments for months on end without ever making a single loan payment to the lender. This goes on until the lender finally forecloses on the loan and evicts the unsuspecting lessee or tenant-buyer.

A Low-Cost, Low-Risk Lease and Option Strategy That Makes Financial Sense:

I hope that you notice my advice and avoid using the high-risk sublease-option strategy, which I have written about here. Instead, use a low-risk lease and option strategy, which involves buying a low-cost real estate option on an undervalued single-family house that you can lease at a below-market rental rate. This way, you not only save money on housing costs but also have the opportunity to profit from the character’s appreciation in value. The lease and option strategy provides a comparatively low-cost, low-risk way to gain control of an undervalued single-family house, without having to incur the cost and financial liability that goes along with outright ownership.

And best of all, when you use the lease and option strategy that I am writing about here, you do not have to become a landlord and babysit tenant-buyers. All you have to do is move in and market the house to possible buyers. In the meantime, you get all of the benefits of homeownership- less the tax benefits-without ever having to:

1. Qualify for a loan.

2. Pay a down payment.

3. Pay closing costs.

4. Pay for repairs.

5. Buy any character.

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