Using Lease Options to Profit from Rental Properties

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YOU CAN MAKE GOOD REAL ESTATE INCOME using a LEASE OPTION on rental properties you own. Here’s how you might do it.

Rent the property to a tenant at the going rent in the area with an option to your renter to buy the property at a stated price in a given time period. Thus, you might rent a Single-Family Home (SFH) to a tenant for $1,500 per month with a Lease Option to buy the house for $125,000 at any time for the next 5 years, or 60 months. 

As part of your Lease Option you will have the tenant pay the first month’s rent, plus a Security Deposit of 3 months’ rent before moving in. This will give you a total of $6.000 (= 4 X $1,500). In some cases you’ll be able to buy the SFH at foreclosure for just a few hundred dollars. So your security deposit will more than pay your down payment on the house, plus give you some working capital.

TO EARN BIG MONEY WITH LEASE OPTIONS it’s usually best to have:

  • A string of SFH–say 10 or more–to ensure a steady monthly income and a phased buying schedule over several years so you can look ahead to blocks of cash coming into your bank.
  • A concentration of your SFH in an area that is easy for you, or one of your agents, to get around. This makes your whole operation easier to run and much more profitable.
  • A focus on the financial aspects of your business. You get the needed down payment on each lease option deal so you have a large enough money reward from every SFH you buy.

YOU CAN USE A LEASE OPTION FOR A MULTIFAMILY apartment building, but your market–that is, the number of people looking for Multi-Family Apartment House deals–is much smaller. So:

  • If you’re looking for a fast start with a large market, go SFH.
  • If you’re looking for a low-cost start, go to SFH now.
  • If you’re looking for easy financing your lease option, go SFH.
  • If you’re looking for a no-credit-check start, go SFH.
  • If you’re looking for quick cash-in-hand deals, go SFH.

TO GET STARTED IN SFH LEASE OPTIONS, contact your local County Clerk by phone. Ask “Who handles SFH foreclosures in this area?” Get the phone number and immediately contact that group. Ask for their free list. Figure which ones you can lease option and start building your wealth!

About Ty Hicks

Tyler G. Hicks is the author and publisher of many popular books, courses and articles on small business entrepreneurship and real estate investment. His books have been featured in Business Week, the Washington Post, and the Los Angeles Times.

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