Real Estate Investment - 2 Unconventional Lease Option Terms

If you are looking to invest in real estate, you can structure a lease option that can accomplish the benefits of ownership over time. There are at least 2 unconventional lease options that can be used by a buyer to invest. The first unconventional option is the use of a seller’s option under a land contract. The other is a lease with the option to buy at the end of the contract. Both of these unconventional options are ways in which a buyer or real estate investor can buy or invest in property without the use of traditional methods.

The usual way to acquire property as a real estate investment is to buy the property outright. This can be done by paying cash for the property, which most investors are not in a position to do. An investor can seek to use leveraging by taking out a loan from a bank or other lender, and using the loan's proceeds to purchase the property. This gives the buyer the rights of ownership, but also gives the buyer a debt obligation that needs to be repaid. The unconventional lease option terms for real estate investing may provide a unique way for buyers to get into a property and not be subject to a large debt.

Seller’s Option to Lease Real Estate

A seller’s option provides a way for the investor of real estate to get into the property without a large upfront financial commitment. Under this type of arrangement to lease real estate, the investor enters what is known as a land contract, in which the investor or buyer pays a regular installment loan amount. The seller retains their interest in the property as owner, but the investor has the ability to use the property as stipulated in the land contract. This arrangement helps the investor "test drive" the property and have use of it under the lease arrangement. It allows the seller to receive some payments toward the property and eventually sell it outright under the land contract.

Lease Option with a Buy Out Provision

A lease option is also possible for real estate investment. Under a lease option, the investor can use the property and enjoy all rights, except the rights of ownership, until the end of the lease option, where they retain the right or option to purchase. This lowers the initial outlay to the seller much in the same way that the seller's option does, and provides a way to invest and eventually purchase the property without having to make a large down payment. 

Both of these unconventional lease options for real estate investing are subject to any laws or restrictions that may be imposed by the community in which the transaction takes place. If you choose to enter into a seller's option or lease option you should consult with a real estate lawyer, or someone who is knowledgeable in these arrangements and can communicate your rights to you. 

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