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If you are a residential investor and have not yet participated in a lease-option investment, then read on...and be surprised at what you've been missing.
As mortgage guidelines continue to convert home buyers into lease tenants, the lease-option has become a major form of purchase financing. Investors are leveraging this scenario to drastically improve single-family investment performance - lease options offer higher and immediate cash-flow, reduced risk, predictable returns, limited vacancy, and a pre-negotiated future sale contract.
The lease-option investment strategy starts with tenant qualification. The tenant then shops for a new home, which we negotiate for investment purchase. All lease terms and future purchase option terms are negotiated before the investment purchase contract is signed. This means no initial investment until we have a pre-qualified, cash-committed tenant, a signed lease, and a future purchase price. The tenant pledges a $2,000-$2,500 purchase option fee in addition to a security deposit and first month's rent. C'mon, could this get any easier?
Consider the following comparison between the proven, traditional approach to rental investments and an improved lease-option approach.
Typical Residential Investment Process
(no lease-option)
1
Identify and evaluate target properties.
2
Negotiate an acceptable below-market purchase contract.
expense
3
Close the purchase transaction.
expense
4
Market the property for lease.
expense
5
Identify an acceptable tenant and negotiate lease terms.
cash-flow
6
Lease the home for 1-3 years, per lease terms.
expense
7
Repair property as necessary to prepare for a new lease or sale.
8
Repeat steps 4-7 until it's time to sell.
expense
9
Market the property for sale.
cash out
10
Negotiate an acceptable sale price, and close.
Lease-Option Investment Process
1
Identify and pre-qualify a quality tenant.
2
Evaluate properties and negotiate possible lease terms.
3
Negotiate a purchase price and a future sale price.
cash-flow
4
Close, and lease the home on the same day.
cash out
5
Sell the home to your tenant at the pre-negotiated price.
So what's missing?
- » Vacancy
- » Lease marketing
- » Make ready & rehab
- » Sale marketing
With a tenant in place from day 1,
these expenses don't apply.
Notice how the lease-option is just a sub-set of the traditional investment purchase model? This approach eliminates several key variables before any initial investment is made: which tenant? what lease terms? what sale terms? The lease-option also avoids major expenses after the initial investment: no lease marketing, no vacancy before the first lease, no make ready or tenant turnover, no sale marketing expenses, and no vacancy during the sale effort. And if the option tenant doesn't work out, they forfeit the option fee ($2,000+), leaving you with a traditional single-family investment.
Interested yet? Get in line! We maintain a queue of lease-option investors - so contact us and let us know that you're interested. We'll discuss further details and determine if you're a good match for any of our tenant prospects. Contact us here to get started with our lease-option investment strategy.