I have been reading up on this type of investing but one thing that isn’t clear to me is why a T/B would sign a Lease Option in a down market. It seems to me that it would benefit the Seller since they would lock in the higher price as home values decrease. In an upward market, it would benefit the t/b wouldn’t it. Please clarify. One more thing, what would keep a seller from l/o a home to someone who they know won’t qualify to buy the house at the end of the lease. This seems unethical as the seller can make a substantial amount of money over and over on short term leases by l/o to t/b they know won’t qualify to buy the house. Am I understanding this wrong.
Hi Rookie,
The price isn’t really locked in until the T/B exersizes the option.
The Seller could do the LO with the thought that the T/B should be able to qualify before the option comes due, and yes if the T/B doesn’t qualify before the option period is up then the Seller is free to do it again. herbster
A proper lease option agreement should establish the sales price (option price) of the property up front at the time of contract signing. Regardless of rising or declining RE market setting the option price is critical to closing the deal and is accomplished by two parties (buyer/seller) acting in their own self interest. The beauty of the lease option is the fact that it is simply an option to purchase and not an obligation. If the buyer negotiated poorly setting the option price too high or the market declined further than anticipated then he/she simply lets the option expire unexercised.
Thanks for the insight. This method of investing makes the most sense for a novice like myself to start off in. Does anyone know of any books that discuss this subject more in deph. The articles on here are more of a general overview of what the the L/O is. Id like to read up on the process of setting up the contracts and negotiating proper terms. Also, i’d like to hear from investors here if they deal more with L/O’s or sub L/O’s.
There’s a ton of good L/O courses out there. Just google or try ebay. IMO, you can’t go wrong with Ron Legrand or Lou Brown L/O courses.
Hey RErookie, if you don’t want to spend a lot of money go to WendyPatten.com and buy her LO sub2 book for 20 bucks. Its well worth the read before you buy a course. Herbster
Thanks, I was at the bookstore today and just got through reading half of it for free, will read the other half on another day. Very informative.
There is link for a free e-book you can download on this very site. Just go to the Home page and click the 'Multiple Streams of Income" banner. This free book explains lease options from beginning to end.
The Multiple Streams of income book is by far one of the best books you can use. That book kept me up all night. I like details!
There are alot of great courses out there, as well.