provided by:
“Lease options are like guns. You either love them or hate them,” William J. Archambault, Jr. of The Real Estate Institute said. “You either see them as a great tool for good, or a great tool for evil."
Controversy about lease options has developed as the strategy has increased in popularity with real estate investors in recent years. The strategy has grown popular in the last 15 years or so, John T. Reed, a publisher of real estate investment books and former real estate investor, said.
In a lease option, the property owner leases the property to a tenant with an option to purchase at or before a set date. The purchase price is usually set up front, and the tenant often makes an up front payment as a sort of down payment.
A rental rate is typically set at least a few hundred dollars higher than the fair market rent, and the excess amount is often credited toward the down payment if the tenant exercises the option to purchase.
Tenants are willing to pay higher rents “as consideration for the option to purchase,” Diana Bartolotta, a real estate investment attorney from Connecticut, said.
Recently, lease options have received negative press as a tool for greedy investors to defraud unsophisticated tenants of their money and, in some preforeclosure or foreclosure scenarios, property. Some of these cases are going to court and could result in new legislation governing lease options.
Lease option evolution
Click here to read the rest of the article.NuWire Investor is an online publication that offers quality information about alternative investments such as real estate, commodities and franchises.
Author: Elizabeth Smith
Copyright © NuWire Investor and NuWire, Inc 2007. All rights reserved. NuWire Investor material may not be copied, reproduced, redistributed, published or modified without the prior express written consent of NuWire, Inc.