# Anyone has tried lease options?



## Danielvalerio506 (Jul 1, 2017)

Hello!! 

In real estate we know that there are a lot of strategies, some gurus say one is the best in the world and others say other strategy is better and we don´t really know which one to start doing first. 

Some people say Lease option agreements are the best way to start investing in real estate because you don´t have to apply for any credit in the bank. 

Other people say Lease options are risky because as you are not the legal owner of the house you just have a lease with a contract that gives you permission to reassign the lease to someone else. You´re stuck in the middle of two contracts and as you are not the real owner there can be problems if the owner decides to cancel the lease or finally sell the house for example. 

There are a lot of opinions regarding this investing strategy. 

What do you guys think about this? 

Anyone here has tried this in the past?


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## sags (May 15, 2010)

It is never an easy decision.


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## Danielvalerio506 (Jul 1, 2017)

sags said:


> It is never an easy decision.


Yeah :/ we learn just trying...


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## Just a Guy (Mar 27, 2012)

A lease option isn't usually used in investment properties. It's usually used by homeowners who can't really afford it, or business owners who already use the property.

Normally, lease option favour the seller on price, and in this market places are already generally overpriced, so again it doesn't make sense from an investment point of view.

If you're talking about home ownership (and that being an "investment"), it can be a fine technique to buy a place, but home ownership is usually not a good real estate investment either. Don't confuse home ownership with investing in real estate to generate revenue or appreciation, you need to look at the two completely differently.


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## Danielvalerio506 (Jul 1, 2017)

Just a Guy said:


> A lease option isn't usually used in investment properties. It's usually used by homeowners who can't really afford it, or business owners who already use the property.
> 
> Normally, lease option favour the seller on price, and in this market places are already generally overpriced, so again it doesn't make sense from an investment point of view.
> 
> If you're talking about home ownership (and that being an "investment"), it can be a fine technique to buy a place, but home ownership is usually not a good real estate investment either. Don't confuse home ownership with investing in real estate to generate revenue or appreciation, you need to look at the two completely differently.


The information about lease option agreements that I have read is this: 

1- A homeowner cannot pay his for example $350 monthly mortgage to the bank so the bank will foreclose soon. 
2- An investor offers a solution to the homeowner by buying the property with a lease option agreement and a reassign contract. 
3- The investor then buys the property but instead of buying what the investor does is take over the monthly payments of $350 (not the debt just the monthly payments) 
4- This way the homeowner can sleep in peace knowing that the payment are being made. 
5- The investor then finds a tenant that can pay $700 monthly for the property. 
6- Without buying the actual property the investor pay the homeowners debt each month and makes a profit of $350 coming from the tenants rent. 

That´s the way I´ve seen lease options used to make a profit with real estate.


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## Just a Guy (Mar 27, 2012)

There are very few assumable mortgages in Canada, they were phased out several years ago. The property owner is usually a homeowner, not an investor, so where are they going to live? You are asking them to move out, but their name is still on title while you are making the payments and have no title claim.

Another part is, after the debt is back under control, what stops the homeowners from thinking they got rooked out of their "equity". Most people don't understand that the majority of a mortgage payment is actually interest to the bank.

There are a lot of problems with this that I wouldn't want to touch, and I think with the ways the rules have changed over the years, it's not even really feasible anymore.


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## Rusty O'Toole (Feb 1, 2012)

There is no 'magic formula'. There are different techniques that can be used at different times, depending what you want to accomplish. In the 1980s lease options were popular because interest rates were high and mortgages hard to get. Today interest rates are low and mortgages easy to get so who needs lease options?

One type of buyer who needs a lease option deal, is someone who cannot qualify for a mortgage but wishes to buy a house. I sold a house a few years back to a couple who got too deeply in debt and lost their house . They were in credit counselling and could not qualify for a mortgage. I sold them a house as a lease option deal. In 2 years their credit was in good shape and they had no trouble getting a mortgage and cashing me out. I was happy, they were happy and the bank was happy.

If you tell us what you are trying to accomplish maybe we can suggest the best way to go about it.


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## Danielvalerio506 (Jul 1, 2017)

Just a Guy said:


> There are very few assumable mortgages in Canada, they were phased out several years ago. The property owner is usually a homeowner, not an investor, so where are they going to live? You are asking them to move out, but their name is still on title while you are making the payments and have no title claim.
> 
> Another part is, after the debt is back under control, what stops the homeowners from thinking they got rooked out of their "equity". Most people don't understand that the majority of a mortgage payment is actually interest to the bank.
> 
> There are a lot of problems with this that I wouldn't want to touch, and I think with the ways the rules have changed over the years, it's not even really feasible anymore.


No, the homeowner is not an investor it is a homeowner who can´t pay his or her mortgage anymore so basically they have to figure something out ASAP or they will be loosing the house. 
The investor would be me in this example, the middleman. 
I agree with you, even thoug it is a good investment option to make a profit without actually having title on the house you are right, there are some details to look at that can be tricky and even dangerous.


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## Danielvalerio506 (Jul 1, 2017)

Rusty O'Toole said:


> There is no 'magic formula'. There are different techniques that can be used at different times, depending what you want to accomplish. In the 1980s lease options were popular because interest rates were high and mortgages hard to get. Today interest rates are low and mortgages easy to get so who needs lease options?
> 
> One type of buyer who needs a lease option deal, is someone who cannot qualify for a mortgage but wishes to buy a house. I sold a house a few years back to a couple who got too deeply in debt and lost their house . They were in credit counselling and could not qualify for a mortgage. I sold them a house as a lease option deal. In 2 years their credit was in good shape and they had no trouble getting a mortgage and cashing me out. I was happy, they were happy and the bank was happy.
> 
> If you tell us what you are trying to accomplish maybe we can suggest the best way to go about it.


The idea is to make a profit from the house without the investor having to really buy it or apply for a credit. The idea is to help the desperate homeowner with the problem, help him or her keep paying the mortgage and aswell make a profit from renting the house to someone else.


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## Just a Guy (Mar 27, 2012)

Danielvalerio506 said:


> No, the homeowner is not an investor it is a homeowner who can´t pay his or her mortgage anymore so basically they have to figure something out ASAP or they will be loosing the house.


The current homeowner loses their house either way.

This is an outdated investment technique as both rusty and I have said. Today it's used more for sub-prime home buyers.


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## Danielvalerio506 (Jul 1, 2017)

Just a Guy said:


> The current homeowner loses their house either way.
> 
> This is an outdated investment technique as both rusty and I have said. Today it's used more for sub-prime home buyers.


Understood. Thank you guys.


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