Lease option and a few other questions.

Could someone please explain to me how a lease option works?

Im curious about ways that i could take over someones mortgage as a way to get into rei.

There is an add on the local rei forum for people who are willing to take over forclosures for people who still want to own their house in a year or so. Would this be something good to get into?

Thanks, Ryan

I think you asked 3 questions, so I will try to answer them:

  1. What is lease option and how does it work?
    This is a very basic question and you can find the answer in a real estate book or by googling it :slight_smile: basically you are “renting” the house with an option to buy it later at a fixed price. You would pay an “option fee”

  2. curious about ways that you can take over someone’s mortgage
    This is called subject-to. You can read about it under the Sub2, Lease option section. If you have the cash, I would highly recommend you purchase John Cash Locke’s course.

  3. I did not understand this question, I think it is about taking over someone’s mortgage while in foreclosure then selling it back to them or lease optioning it back to them? if so, I would consult a lawyer before doing so for legal issues. Not to mention, if they could not pay their mortgage to begin with, how could they pay you for it?

I didn’t read the forum ad you talk about, but I would agree with fadiz about lease optioning the house back to them. That is actually a pretty good way to make some good money.

Here’s the thing, people that opt to do the lease back are not willing to move for any reason and in one of 2 positions: they got behind and can now afford the monthly payment, but not the penalties, or they cannot afford to stay in the house and are too stupid to listen to reason. So, for those in position #1, you get the deed to the house (buy it subject to), reinstate their mortgage, lease the house back to them for a year, tack on ten or 15 grand to the buyback price (plus an extra hundred or so a month for some cash flow), and make a 100% return on your investment (or more). People in the second category will typically lose the house anyway, so why not to you? Better than the bank. If they have the equity, you can buy the house for what they owe (take the house subject to again) and lease option it back to them. When they stop making payments, evict them. Of course, make sure your contracts are appropriate for the situation. CYA.

On the surface it seems unfair to do this knowing that they probably won’t make the payments, but look at it this way: if they are that stubborn, they are going to lose the house and their equity anyway. Why not to you?

Good luck.