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Real Estate Option: Powerful Strategy For The Buyer |
By:
Jacques Coquerel |
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Real Estate Option: Powerful Strategy For The Buyer
Jacques Coquerel
For us to begin the inspection of why a real estate option can be a powerful strategy when it comes to making maximum profit in real estate, we first need to know what real estate option is. A real estate option is defined as the right - not the obligation - to buy a property for a specified price (strike price) during a specified period of time. An owner of a property may sell an option for someone to buy it on or before a future date at a predetermined price. The buyer of the option hopes the value of the property will either go up.
If you're looking for a strategy that will lower the risks, allow leverage, and cut on cost, then the real estate option is it. This strategy also makes possible to minimize downside and an option consideration lower than an earnest money.
The other benefits of this strategy aside from being mentioned above and knowing each closely will allow you to exploit its full benefits.
The number one benefit of a real estate option is possible in an exclusive option: the option buyer is given full control over the property during the option's period. That is to say that the property is not available to other buyers while you hold the option. Even though you have not spent purchase money yet, you have 100% control over the property.
The buyers are also given protection against the possibility of a higher price than the current property value. For example, if by unfortunate circumstances the property value plummets when the option matures, the buyer can just say no to the purchase of the property without the fear of being sued. Therefore, you escape paying big money for a property with less value during the maturity of the option - a great money saver strategy.
Not only this strategy can be a great money saver, it could be a leverage builder, too. To do this, you should include a provision in your agreement between you and the property owner to allow you to sublease the property to another person. You could generate income from the difference of the rent money your tenant pays you and your obligation to the property owner. You could practically say that your rent is being paid by another person in this sense.
You could also be saving your capital for the purchase of the property at the end of the option. There are option arrangements called lease-option wherein a portion of your monthly obligation shall go to the purchase price of the property upon maturity. And if you sublease it to someone else, you are building equity with virtually zero cost on your part, thus saving your capital.
Some properties offered for optioning, however, are problematic. The owner could be facing looming foreclosure or government reacquisition so that you could be in big trouble if you signed up for an option with these kinds of property - you could lose your money. A thorough background check, however, should prevent this from occurring.
About the author: Jacques Coquerel is a real estate investor based in Atlanta, Georgia. He has made more than 750 real estate transactions since 1996. For http://www.getquantumleap.com/) Real Estate Investing Tips get his free course http://www.getquantumleap.com/) Real Estate Investing Free Course.
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Article Source: http://www.statssheet.com/articles/article67363.html |
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