Before We Dig Into Lease Option Real Estate Investing

Let's talk about the key differences between lease option real estate investing and simple real estate wholesaling investing. While they appear similar in approach, they are very different. And the people they serve tend to be of different walks in life.

Making Money with Real Estate, Creatively

Talking about the key differences between lease option real estate investing and simple real estate wholesaling, and why it matters so much.

Lease option real estate investing has the ability bring out the smile in anyone who knows how to work this type of real estate investing. That's because everyone is a winner when it closes.

With both wholesaling and lease optioning real estate:

  • You don't need money to invest.
  • You're helping several sets of people.
  • People skills are a must.
  • You'll probably spend just as much time on either concept.

The key differences are:

  • Wholesaling typically involves distressed or unkept properties. And the lease option strategy usually involves more turnkey types of property. Not always, but mostly.
  • When you put together a wholesale real estate deal you can expect to make one assignment fee, however if you put together a lease option transaction, you are opening up the opportunity for multiple pay days. Minimally two, more often 4 or more. And larger paydays.

Most real estate investors tend to gravitate to one concept or the other, seeing how when you get started with wholesaling you can do more deals per month. Lease option real estate investing is a bit more refined, and the deals tend to be bigger paydays,-- but fewer deals per month. So you'll need fewer lease option deals to make the same amount of money with real estate versus simple real estate wholesaling. But the effort is twice as much for each deal you will do.

Continue Reading -- If Multiple Paydays Will Make You Smile

It's true that when you approach a homeowner with the idea of a lease purchase you'll need to do a small amount of educating. Simply going over the initial points on why it's in their best interest to sign up for a lease option purchase instead of waiting (and waiting) for the right buyer to come along and cash them out.

But once you figure out how the whole lease with an option to buy works, it's as easy as if you invented the idea yourself to explain it to anyone else. You'll be an evangelist on the topic!

If you decide that lease option real estate investing will play into your business plans, you may not want to do anything else. Bottom line, it's a personality choice rather than a choice about available time.

(Here's an overview of the lease option to purchase concept).

With that in mind, it's important that you share how you intend to market their house to a qualified end purchaser, if that is your intensions. No one enjoys being kept in the dark, especially when it comes to homeownership. Often, when you speak with the homeowner they are considering how your lease option suggestion will turn out for them in the end. Remember, it's all about the seller. Once the seller is on board, you can move on to the next stage of the lease option plan.

Boy, was I wrong about lease option real estate investing 

If you asked what sort of person would agree to lease out their home, instead of outright selling it, you are not alone. When I first was introduced to lease options, as a way to make money from real estate I didn't own outright, I never thought I would find a seller who would fit this plan. Boy was I wrong. 

It was a Saturday and I had just made a bunch of calls to FSBOs (for sale by owner homeowners). After lots of brush-offs, I was feeling a bit down.

Then, the very next call I made the homeowner asked if I'd like to see the house and discuss it some more (I hadn't even gotten through my whole planned script). Later we met at his house, he immediately shared with me the reason he needed to sell his house quickly and he was hoping I was his answer to prayer.

There are many reasons for someone to put their home on the market, and a job offer in another state happened to be this Seller's motivation. He told me that he wasn't confident he would be able to manage the house from another state, if he rented it out. I explained that I would handle all the tenant issues if he agreed to lease the home to me with an option to purchase, while finding a suitable buyer for his home.  We discussed how I would make his house payments, keep the property in tip top condition while actively marketing it for that perfect buyer. 

He could move right away, and that's what tipped the scales.

Well this is just a quickie overview of what you can make of a lease option business. There are a few other ways to lease option a property, and we'll talk about those approaches in the articles below.

Learn more about lease options and how to make money using them with these articles:

An overview of the lease option method of making money with real estate

Customary lease to own option fees

How to correctly use lease options to buy houses

Free example to print off - Lease to Purchase Option Agreement

How lease option real estate investing can work into your investing goals

Let's get creative with Sandwich Lease Options

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