In the real estate business, it is important for us to have multiply exit strategies after investing in a real estate deal. Lease options and subject to deals are two of the most commonly used exit strategies that real estate investors use.
The Difference Between a Lease Option and a Subject To
The difference between a lease option and a subject to mainly lies on the ownership. With a lease option, you as the investor have a right to control the property without owning it. With a subject to, however, you get the deed to the property. This means that not only do you have control over it, you also have ownership.
The main key point in choosing between the two strategies is in determining the seller’s financial status. In choosing to lease option a property, you have to make sure that the seller or property is not in financial distress. The seller must not have any bad debts on him.
In a subject to, however, a seller or property in distress can be considered. On reason why you’re getting the deed to the property is so that the seller with a bad debt won’t screw up the deal. Of course, in a subject to deal, the property does not necessarily have to be in financial trouble. You can also do a subject to with sellers and properties that are in good condition.
Sellers and Buyers of Lease Options or Subject Tos
Real estate investors know that the lease option market gains more profit than rehab and is worth five to ten times more than retail. But putting aside the benefits a real estate investor can get, the real goal of every real estate deal should be a win-win-win situation, wherein you’re not the only one who ends up happy with the deal. The win-win-win type of deal also gives sellers and buyers benefits for selling or buying the property.
So what motivates sellers to go for a lease option or a subject to? The main reason is to have debt relief. They will be cleared of their debt, whether good or bad. In the case of a lease option, only those of good debts are considered. Other reasons could include new events in theirs lives — marriage, divorce, job transfer, or losing a job, etc. The bottom line is that the sellers will get to go on with their lives and stop worrying about their debts and their property.
As for the buyers, they will always be in a win-win-win situation. This is especially because or the riding market of real estate lease options and subject tos. Buyers need real estate investors. The country is full of people with bad or poor credit, and they are ready to buy lease options or subject tos.
System For Lease Options and Subject Tos
Having a system has been consistently advised by many successful real estate investors to their colleagues. Negotiating lease options and subject tos require no less if you want to make it big.
The first step is getting a deal. In getting a good deal, you have to first generate possible leads. One of the best ways to get leads and, in the process, get a deal is to find a good realtor to work with.
Realtors actually control about 80 to 90 percent of the market. They also have what you would want when looking for good properties — a sellers list. What’s more is that they realtors tend to know a lot about the sellers and issues concerning the sellers (divorce, financial trouble, marriage, etc.).
You can find realtors in many ways. Start first with a realtor you know. Then ask for his or her network of realtors and go from there. You can make letters or presentations with them. The one thing you have to remember to gain a realtor’s connection is to explain how you can help them in return for getting their sellers list.
If you help the realtor, and you help the seller, then you get the deal.