The Secret to Making Money With Lease-to-own Properties

by : Judson Voss

As a real estate investor, you may be looking to purchase homes with the thought of renting them out as a means of generating consistent monthly passive income. However, with all of the issues that are involved with becoming a landlord, you may be thinking twice about this strategy of real estate investing. In this case, the lease-to-own option may be just exactly what you have been looking for.

When you offer a property to a tenant as a lease-to-own option you are essentially renting to them. And, as an added bonus for the tenant a portion of their rent can serve as a future down-payment to purchase the property. The biggest secret to making lease options work well for you as the investor is to write your contracts in a way which removes yourself from the day-to-day issues of the property. By offering a good lease-to-own contract to a potential tenant, you can easily put the responsibility of upkeep and repairs onto your tenant and put yourself in the position of simply being the lender on the property.

In order to find a quality tenant is it important to screen each of your potential tenants on an individual basis and take a good look at their current and possible future financial situations. Generally, people interested in lease options are either cash-poor and unable to afford a down-payment even through they have a good income, or they have some other issue in obtaining a mortgage today that should resolve itself within a few years. Good examples of this type of tenant are those who have gone through a recent divorce or job change which has taken them across the country.

Standard lease option contracts are for a minimum of 3 years. However, if your tenant decides after 3 years that they want to continue to lease from you but cannot purchase yet, you can extend your contract and update the purchase price to reflect the current market value of the property.

By finding good quality tenants, and giving them a good deal on your property with fair terms, you can ensure that your property stays in good repair, stays occupied for a long time, and eventually it will either sell to the tenant or you can start again when they choose to move out.