The Lease Purchase business is in many ways the ideal home-based business. It offers the opportunity to operate from your home and generate multiple income streams. Lease Purchase has the potential to be win-win for the seller, tenant buyer and the small business owner. A Lease purchase of real estate is an actual sale, with a delayed but pre-determined date for closing the sale. This date could typically extend six months or more into the future. The seller is able to move out from his house even though it is not yet sold. Simultaneously, an otherwise credit-worthy buyer may need time for selling his house, or to accumulate additional time on his job to qualify for a mortgage loan. It is in his scenario that you, the real estate entrepreneur, contracts for a property that a tenant buyer then moves into based on a set of conditions. There are a number of options to generate cash in a Lease Purchase business.

Pre-Requisites For Starting A Lease Purchase Business

1. Risk-taking abilities. Although there is minimal risk in the Lease Purchase business, there may be instances when you contract for a property and are not be able to move it. A moderate risk-taking propensity should help you withstand such situations.

2. Attention to detail. The Lease purchase business demands the skill to keep an accurate record of your transactions and meetings. An eye for detail certainly helps.

3. Forbearance. Many deals require you to have a great deal of tact and patience while negotiating with the parties. This quality can be a great asset.

Working On A Lease Purchase Deal

1. Purchase Agreement. The first step is to draft a purchase agreement and take a security or earnest money deposit. This insures against the eventuality of the buyer not closing the purchase, when all the conditions in the purchase agreement would apply. Try and get as much earnest money as possible. Besides acting as an incentive to close the deal, the cash can be used to finance essential repairs to the house.

2. Lease payments. The amount you charge a buyer in monthly lease payments until the deal is closed should be enough to cover your current mortgage payment. Other factors you have to consider are what rent similar properties are fetching and what the buyer’s payments will be once the deal is closed.

3. Inspection of the property. The buyer, seller and the real estate agent should walk through the property prior to making the deal. Make inspection notes of the general condition of the house, flooring, carpet, walls, appliances, fittings, exterior and yard. This walk through serves as a benchmark of the property’s condition at the time of buyer’s occupancy to avoid any future complaints regarding the condition of the house. The inspection notes should be inked and signed by both parties as evidence of inspection.

4. Finances. The buyer should have a pre-approved mortgage loan before contracting the lease purchase document. This will help in securing monthly installments to the seller. 

Lease Purchase Strategies

1. Lease Purchase and sub-lease. The tenant/buyer pays the agent who in turn pays the seller, keeping the difference amount. This is also known as sandwich lease purchase and gives a steady and positive cash flow.

2. Cooperative Assignment. The investor contracts for the property and assigns or sells that contract to a tenant/buyer with the approval of the owner/seller who decides on the type of the tenant occupying the house.

3. Straight Assignment. The investor contracts the lease purchase and sells it to the tenant/buyer on set terms, requiring no approval of the owner/seller.

4. Consulting with sellers. A real estate investor can provide a proper lease purchase contract and marketing plan for the property with all supporting material for successful sale of the property after consulting with the seller. This works well for slightly far-off properties with low selling potential. 

5. Consulting with tenant/buyers. A real estate consultant can draw up a good lease purchase agreement for people with limited funds to become tenant/buyers. This also helps them to search homes within their budgetary constraints.

A lease purchase business is ideally suited for a person with moderate risk- taking abilities, a good deal of patience and good negotiation skills. A good deal is a win-win situation for all parties to the contract, besides generating a sizable income for the real estate entrepreneur.

 

Do you own real estate articles or stories and want to share with other investors? 
You have chance to win $100 Amazon Gift Certificates. We will give away 3 prizes for top authors each month!

Email your articles or stories to:  articles@buyincomeproperties.com

 

© Copyright 2001 - 2010 by BuyIncomeProperties.com               

 

 

Visit Real Estate Forums for every real estate investing topics!  Enter Here

    

Top of Page