Lease Option Strategy For Investors

The lease/option can be an excellent tool for profiting on rehab properties. Many distressed properties can be bought cheap, but this requires cash. Furthermore, you need cash to fix up the property. You also have to pay monthly interest payments while waiting for your subcontractors to finish the job and for the new buyer to qualify for his loan.

Rather than purchase the property, lease it for six to twelve months with an option to purchase. If the property is not habitable, offer the owner discounted rent with most or all of it applied toward purchase. Compare this strategy to borrowing money and making interest payments while you are fixing up and holding the property for resale. You can save yourself extra closing and financing costs by leasing with an option, fixing, the exercising your option rather than buying, fixing and selling.

You can also fix up the property, then sell your option to another investor. Of course, make certain that your option is protected before you start sinking cash into the property. If you are not into fixing properties you can consider a subtenant who has handyman skills.