Lease Options : A Great Way To Make Money In Real Estate

by : Omar Johnson

For all of you aspiring real estate entrepreneurs and investors who want to make money in the real estate game Lease Options and Options are great way to accomplish this with little money or no credit. Let's examine the beauty of making money in real estate using this creative way.

Lease Options and Options. Lease options are a great way to take control of a property without owning it. In a lease option scenario you would take control of the property by leasing it from the owner with the option to buy it.

When you lease the property from the owner of course "subject to" their existing mortgage you must have in your lease agreement the right to sublease to a tenant buyer. Buying a property "subject to" the current mortgage loan it simply means that you don't get new financing, you would just leave the existing loan in place and take over the payments.

Once you have made a "subject to agreement" with the seller you would then sublease it to your tenant buyer. When you sublease to a tenant buyer, the difference between the payment on the mortgage and the rent that you would collect from your tenant buyer would be your "spread" or the monthly cash flow that you would receive.

In addition, to this fabulous arrangement you would also make money when that tenant buyer has paid you a non-refundable deposit to move into the house. The deposit would go right in your pocket. Sounds pretty good doesn't it?

This non-refundable deposit would be applied as a down payment for them on the house and subtracted from their purchase price. Furthermore, you make money on the back end when that tenant buyer finally gets financing and buys the house from you.

When the house is bought by the tenant/buyer the owner's loan balance is paid off and if they had any equity and they were willing to leave some on the table, your back end profit would derived from that.

Your back end profits would be the difference between the price that you optioned to buy the house for from the owner and the purchase price that you gave to that tenant buyer. Sound easy doesn't it? Well, in reality it is.

Let's move on to examine a straight option. In a straight option you would simply get an option to buy a property at a specific ideal price. An ideal price would be a price that would allow you to make a substantial profit when you've have sold the property.

For example, a house by the lake is appraised at $700,000 and has been on the market for a while and the owner is willing to sacrifice some equity to get rid of it.

You've negotiated with the seller to get an option to buy the house for $600,000 and you then turn around and sell that option to a buyer for $650,000 .You just made $50,000 and everyone benefits from your efforts. The seller sold a house they had trouble selling and the buyer of your option and the house instantly gets $50,000 of equity from the house and of course you made your $50,000.

In conclusion, as you can clearly see using the Lease Option and Option methods are creative ways that A Real Estate Investor or Entrepreneur can use to easily make money in real estate.