Building Your Part Time Real Estate Investment Portfolio

Lease Options are often used as "medium" to "long term" exit strategies for selling properties within 1 to 10 years. The basic idea behind this investing strategy is to get control of a nice property below market value, find someone who fits the "homeowner" type to be the Lease Option Tenant-Buyer, and to sell the property to them at maximum price.
The Tenant-Buyer is usually someone who makes good money but may have credit-type challenges such as being self-employed or may have other issues standing in the way of the standard mortgage qualification process.
What you'll then do is rent the property to the Tenant-Buyer for a period time, help them clean up their credit as necessary, and help them purchase the property from you at top dollar.
The best types of properties for Lease Options are usually nicer rows/twins or single-family homes that are in good condition or that only need minimal repairs.
Conventional Lease Options usually have the Tenant-Buyer paying a monthly rent and a certain portion of that rent (called the "rent credit") goes toward the Tenant-Buyer's down payment when it's time to buy the house.
My Attorney has advised me to stay away from that particular strategy because of something called "equitable interest". Having equitable interest in a property, in very general terms means a person "owns" some of it. If your Tenant-Buyer pays into this rent credit over a period of time, they may be able to claim an equitable interest in the property.
I'm not a Lawyer here but imagine a situation where your relationship with this Tenant-Buyer has gone bad, they talk to their Lawyer, this "equitable interest" thing comes up, and you wind up in court - not good.
My Attorney has advised me to use two separate contracts at the same time to achieve that same Lease Option goal. One contract is a regular rental agreement and the other contract is a standard agreement-of-sale with the same timeline.
The idea here is to give your Tenant-Buyer the option to purchase the property and avoid equitable interest by having your purchase terms completely disconnected from your rental agreement.
Lease Options are a nice way to buy higher-end homes and have higher-end Tenants at the same time. For the real details of how to go about Lease Option investments, contact your Attorney.
Mike Coraluzzi has been called the "lead generation expert" for part-time investors who don't have time to chase down deals. He is the author of the "No-Time Real Estate Investor Marketing System", a lead generating system that's specifically designed to bring deals to part-time real estate investors. Get your system FREE at www.NoTimeRealEstateInvestor.com. Mike is a successful investor and coach who owns companies in Real Estate and Marketing.