In real estate business, lease options and subject tos are two such techniques that can provide the investors with huge profits. The only condition is that you must know how to use these techniques properly. Using these techniques, you can get money from the seller or the purchaser or both in the very beginning of the transaction. Moreover, when you use both the techniques simultaneously, it works wonder. What is more, they do not require you to spend a fortune. Normally, it takes little money or sometimes, just nothing. However, many people do not like the idea of buying a lease option; they just want to do subject tos because they think if they do not get the deed, they cannot do the deal. This is a wrong conception. The simple theory is that the more tools and techniques you use in a real estate deal, the more money you can earn, that too, at a much faster rate. However, there are certain pros and cons with both the techniques that you must understand before you use them. But, before we go ahead, let me explain in brief what exactly are these techniques.

Lease Options
Using these techniques, you can gain control of the real estate property. However, when I say ‘control,?it does not mean that you will get the ownership of the property. It means that you get an instant right to possess that property for certain duration and then can purchase the same at a future date on your terms. 

Subject Tos
Using these techniques, you do not need to get a mortgage to acquire a real estate property. Subject Tos allow you to get the deed to a property without having a new mortgage. In this case, the seller signs the deed subject to the existing mortgage. This way, you just have to make the mortgage payments on the old loan only. 

Now that you know what these techniques can do for you, you can certainly use them. However, it will be very prudent of you if before using the same, you get an idea of the pros and cons of the both these techniques.

Lease Options: Pros and Cons

Let us first examine the pros of lease options.

Risk-free Deal
This makes your real estate deal risk-free. For example, in case you find out later that the market price has come down, or say there is something wrong with the property, you can change your mind and terminate the deal. You are not bound to buy the property in any case. 

Get an Attractive Property
If the property is in awesome condition, even the seller prefers to do lease options rather than giving up a deed. Thus, this technique can be a great way to get a good property.

Can Work as a Refinance
After a certain period, normally 12 months, lease options can work for you as a refinance. You can find many lenders who will treat a lease option as a land contract or a contract for deed refinance. This way, without having been on a deed, you can enjoy its benefits.

First Choice of the Sellers with Lots of Equity
Sellers with lots of equity also prefer to do lease options rather than giving you the deed to their real estate property. 

Now let us examine what are the cons of lease options.

No Ownership
You just get a control over the property, and not ownership. Therefore, you need to be careful while going for a lease option. You should carefully examine the seller. Moreover, it is always prudent to do lease options from strong sellers only. Strong seller means the one who will not create trouble for you later.

No Long Term Gains
Going with lease options mean no long-term gains; you will have short-term capital gains only. 

Guarantee Vs Option
Some sellers see transfer of a deed as a guarantee, and they do not think that a lease option is a closure on the property.

Early Closure
It is true that the sellers with lots of equity prefer to do a lease option, but at the same time, it is also true that they also want to close it soon so that they can get their equity out.

Subject Tos: Pros and Cons

Like lease options, subject tos have also certain pros and cons. Let us examine the pros first.

 

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