Real estate lease option 

Solves a problem that has always been with us and one that is going to get much bigger, very rapidly with the tightening up of sub-prime mortgage lending. That problem is credit.

Bring up the subject of using Lease Options for real estate transactions and you normally get one of three reactions. "I hate 'em! I have never seen one work out right yet!" - from some real estate agents. "I think they're great!" - from investors who actually use them. Or maybe you get a "What's a lease option?" from someone just getting into the business.

Whatever your position, I probably wont change your mind. I will say however that lease options are one way to control and benefit from real estate without taking on the risks of ownership. And they provide a service that cannot really be done in any other way, except with rent to own and the two concepts are so close together that they are almost the same thing.

Credit problems plague people all over the country and around the globe. These problems make it difficult to purchase vehicles, find employment, open a bank account, and purchase or rent a home. For those who are going through this experience, hope seems a thing of the past when it comes to the very Greek dream of owning a home of one's own.

But there is some good news. That is that there are some savvy investors that are willing to take the risk with those people who have had credit problems but are attempting to get their lives back in order. Getting out of credit trouble is not an immediate thing. It takes a while and for many the process is long and filled with pitfalls and missteps along the way. For those that are living the nightmare of poor credit there are times in which seem hopeless.

For this reason, investors that offer lease to own real estate to those with credit blemishes are often viewed as saviors on the one hand and villains on the other. However, they are taking a risk that others are unwilling to take with a person that has not proven to be a good credit risk. Most investors charge more than the current market price for the home and require a substantial deposit up front. This was, they have some protection if the lessee decides to default on the contract. It is also their money that will be required to make any repairs that will be needed if eviction becomes a necessary conclusion.

Some investors who are interested in holding rather than selling a property also find that lease option real estate works for them. Why? Well, many times the 'buyers' will find another property after a couple of years and will have essentially rented the property for a specified amount of time. At other times they will seek alternative financing once they have been able to straighten out their credit situations.

Either way there are many occasions when the property is returned to the investor who has earned a fair profit. The lessees also take some degree of 'pride of ownership' in the property during the time they occupy the home compared to ordinary renters who often have little or no regard for the condition of the landlord's property.

Lease to own real estate can be set up several ways. The most common however, is that there is a specified amount of time, typically 2-5 years, in which those that are leasing the property can live in the property prior to finalizing a purchase. During this time, a portion of the monthly lease payment is commonly applied towards a down payment for the property once they are able to get traditional financing.

If a twenty percent down payment is accumulated during that time the chances of them being approved for a traditional loan are greatly improved. If they (being the lessees) combine this opportunity with serious efforts to improve their credit scores then there should be no problem achieving this.

Lease options are much more attractive than renters to an investor for several reasons. First, in most cases the minor maintenance and the attendant headaches of being a landlord becomes the problem of the lessees rather than of the investor. Second, the 'renters' are hoping to have ownership of the property in time and will take care of it and often add improvements. And third, the investor can charge a little more each month for rent in order to cover the money being applied toward a down payment.

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