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Why Lease Options are Excellent for Real Estate Investing
As the real estate market evolves and changes, there are fewer mortgage loans available and fewer people who qualify as the factors for qualification become more stringent. Having less than perfect credit puts, a cramp on the ability to obtain the necessary financing for a traditional home purchase, but that does not mean that fewer people want to settle into a home and become a homeowner. Real estate investors are learning that they can benefit from this situation and make a profit by offering nontraditional means of obtaining a home to those with credit that is not well established or is less than satisfactory to a mortgage lender.
Lease purchase options, or rent to own homes, are a great source of income for the creative real estate investor who wishes to make money while helping those who cannot get into a home with their own credit to realize their dreams of owning a home. Lease purchase options work much like a leasing a vehicle, only on larger terms. It benefits the tenant buyer who cannot obtain a mortgage to purchase the home by offering them the opportunity to build their credit and make the choice to purchase later while also assisting the investor by maintaining an additional source of income for the duration of the lease period.
When a car is leased, there is a nonrefundable deposit paid to the dealership that equals a percentage of the car’s value. This is also done in a lease purchase or rent to own agreement and is referred to as the Nonrefundable Option Payment, securing the tenant buyer’s ability to choose whether or not to purchase the home at the end of the lease contract agreement. As with a vehicle, there is a lease contract signed in which the tenant buyer agrees to make a payment of a certain amount each month for a predetermined length of time, usually 12-24 months. This can be done in a manner that includes payments to be credited toward the purchase of the house or not, depending on how you want to set up the lease.
Finally, at the end of a car lease, the driver has the option to finance the remainder of the “balloon payment” owed on the vehicle in order to purchase it or to turn it back over to the dealership. In real estate, when working with a rent to own or lease option contract, this is referred to as the Option to Purchase contract, in which the tenant is given exclusive rights to purchase the real estate property without you offering it to the highest bidder first without obligating them to purchase when the lease is up.
If the option contract was signed so that the payments made during the lease period were credited toward the purchase of the home, the tenant buyer will need to obtain a mortgage loan equivalent to the remainder of the purchase price originally agreed upon. If there were no rental credits, the tenant buyer will need to obtain the entire purchase amount.
Lease purchase options and rent to own housing are excellent ways for a real estate investor to make a lot of money because there are three different sources of money coming in, all of which add up to a sum greater than the original investment by far. You put little money into the purchase, and in exchange, you receive an up-front payment, monthly installments, and finally a purchase payment equal to an amount greater than you paid.
When writing a home rental contract, be sure to include the tenant’s full name, the address of the property, the term of the lease, the rental amount and all details concerning legal liability and tenant responsibilities. Draw up a rental contract, and get each one notarized after it is signed, with helpful information from an experienced real estate agent in this free video on renting a home. Expert: James Kurkela Bio: James Kurkela, together with his wife Judy Kurkela, are licensed real estate agents who have been serving Putnam, Westchester, Orange and Dutchess counties for more than 20 years. Filmmaker: Kefa Olang
Related Home Leasing Articles
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Tags: Town Home Leasing Ideas
Home buying is a decision. It involves careful analysis of factors like its location, cost, structure and design, proximity towards workplace and so on. Buying a single family home is not everyone’s cup of tea and need less to mention affluent families are better off in buying them.
If you are a person of moderate means, and want to own a house for yourself, leasing a town home may come to your rescue. Town homes are generally two storied buildings together arranged in a row. Most town homes share a common wall and are festooned with a yard.
There is no denying of the fact that a single family residential unit is a pillar of one’s financial stature and monetary prowess. But at the same time town homes offer certain advantages over single family residential units. Town homes offer you a secured living as opposed to single family homes where you are exposed to the risk of robbery, theft and pilferage.
Single family homes entitle you to the ownership of the land and sometimes the maintenance of the house appears to be a toilsome task. Leasing a town homes relieve you of this responsibility. It is the homeowners association who takes charge of maintaining the residential units. In return, you have to maintain nominal fees in their reserve account or pay them a monthly rental.
More over if you have just stepped your foot in the early career, you might consider job changes which might involve relocation to some other place. In that case, leasing a town homes is probably your best option. If your job requires you to move to some other locations, you won’t have any problem shifting your home. On the other hand, when you own a town home, you have to sell it off before relocating which again is a time consuming process and the process may take about 6 months or more.
One of the most striking features that set town homes a class apart is the wide choice of designs. If you are looking for town homes for rent, you would be able to select town homes as per your preference. The structural designs range from a traditional to contemporary, from rustic to elegant.
Again, it caters you with added amenities like, spa, tennis court, barbeque, fitness rooms and swimming pools. The dwellers of course are required to share these with other home owners. Most importantly town homes entitle you to enjoy these benefits and relieve you of their maintenance. However some town homes associations have stricter rules regarding children and pets which can sometimes get over bearing. Though the home owners association undertakes to take care of all adjacent properties, any delinquency in their part might prove non-conducive to your daily living.
Last but not the least, townhomes foster community feeling. It is ideally suited to people who hail from a common institutional background. It harnesses the common feel developing the togetherness of a community and thus benefits the society as a whole.
Summary: The article gives a brief comparison of buying a townhome over leasing it. The author explains the advantages of leasing a townhome rather than buying them.
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Town Home Leasing- an Affordable Living Plan
When the idea of buying a town home comes into question, it certainly accentuates deep frowns in the faces of many first time buyers. It is a popular notion that a town home is never a first class living choice and is an option for buyers of low financial means. Contrary to this opinion, buying a town home is now a preference of many affluent families and according to many townhomes offer one of the most comfortable living style within a reasonable price. The most advantageous part of living in a town home is that the owners are relieved of the responsibility of maintaining the household. Buying a town home offers additional benefits apart from the apartment. The town home owners are entitled to use the extended properties like the parking lounge, swimming pool, and gymnasium and the like. In a way, town home offers an ideal living style with features of both a single family home and that of a condominium.
The entire maintenance of these extensions is carried out by the Home Owners Association. In consideration of these services you are required to provide a monthly rental. So if you are a retired person, and are tired of daily household chores, town homes many provide you a peaceful abode. However the properties adjacent to town homes are shared with other inmates. The home owners association requires you to follow certain norms and regulations as far as maintenance of the town home is concerned. You would better go through the CCR (convent, Conventions and Restrictions) document before you make up your mind of buying a town home.
Town homes offer one of the most comfortable living styles in a moderate budget.
Moreover several financing options make it easier for you to acquire your dream home and that too in easily payable installments. Among the most affordable home loans, home equity loans are quite popular. It gives you the option of mortgaging the home itself as a collateral and extend you credit at low interest rate. It is interesting to note that the amount you pay as interest on loans can be claimed as deductible benefit while filing your income tax retune. So, in a nutshell, buying a town home actually costs you very little. You are entitled to ownership of an entire impartment with minimum risk and price.
Town home living is ideally suited for people who wish to be surrounded in groups. It is a place that fosters community Lifestyle and harnesses fellow feelings among members of Community. A good number of people simple enjoy the company of neighbors and indulge themselves together in social activities that simply spice up their spirit.
However, it should be borne in mind that sometimes a boring neighbor or someone too much interfering in your privacy may make your life a living hell. So, while you make up your mind about buying or leasing a townhome; do have a talk with the other inmates. This would certainly help you develop an idea about the culture and lifestyle of your prospective future home.