With the real estate market evolving, there are fewer banks approving mortgage loans as a result of the change in qualifying factors. For individuals with less-than-perfect credit or not enough cash for a down payment, the doors have been closed for them and many individuals wishing to become homeowners. Because fewer people are able to qualify, investors had to develop non-traditional ways to help these individuals get into homes. This has led to some creative real estate finance strategies.

There are a number of ways that individuals can obtain their dream home without necessarily going the traditional route to secure financing. Rent to own and lease purchase options are two popular ways to do this.

Rent-to-Own Homes

Rent-to-own homes or lease purchase options have become a great source of income for the real estate investor and a lifesaver for those who would otherwise not be able to purchase a home.

You can compare this real estate strategy of lease purchase options to leasing an automobile where you put a down payment down, you lease it for a pre-determined amount of time, and then you purchase it at the end of the lease.

Benefits to real estate investors:

* They are receiving a residual income.
* They are assisting others obtain a goal that otherwise would not be possible.
* Their investment is secured by a non-refundable deposit, which the buyer forfeits if the deal does not go through.

Benefits to the buyers:

* They can move into the home before they actually purchase it.
* Many times, their deposit will be applied to the purchase of the home.
* They have a chance to improve their credit rating while leasing the home.
* They have a chance to save for the down payment while leasing the home.

How Lease Purchasing Works

* Normally, this rent-to-own or lease purchase agreement requires a non-refundable deposit, which is the “option payment.”
* The length of the lease is set 12-24 months, or whatever is agreed upon.
* There is a contract signed, which states the buyer agrees to make monthly payments to the seller. This monthly payment is normally higher than what the home would normally rent for. In some cases, a percentage of the payments may be applied to the purchase of the home.
* At the end of the lease, the buyer has the option to finance the remainder of the balance owed, sometimes referred to as a “balloon payment,” and purchase the property. Or they can move, forfeit their deposit, and have no further obligations to the seller.

Lease purchase or rent-to-own options are an excellent way for a real estate investor to make money because they have multiple sources of income from this one property. They receive the option deposit; they receive monthly payments; and at the end of the term of the agreement, they will either walk away with the proceeds from the sale or the forfeited deposit. Either way, it’s a win/win situation for the real estate investor.

Adam is active in various social and community programs aimed at providing equal opportunity to education,health,jobs and business opportunities to all regardless of where they are from. Adam has over 10 years experience in managing a successful multi-million dollar advertising and publishing company.