7 Reasons Why Real Estate Options Are Ideal for Beginner and
Advanced Investors
Copyright 2005 Alex Nghiem
Whether you are an advanced real estate investor or just getting
started, real estate options can be an ideal investment
technique. A real estate option is a way to control a property
without owning it and it locks in the buying price for a
specified time.
Most investors don't understand how to use a real estate option,
which is unfortunate because it is one of the most powerful
tools in real estate investing. In fact, super successful
investors such as Donald Trump routinely use real estate options
for maximum leverage.
Here are 7 reasons why options are ideal for real estate
investors, beginner or advanced.
1. Since you don't own the property, you are not obligated to
make house payments. You also don't have to deal with repairs,
holding costs or tenants. Imagine how flexible you can be if you
don't have to deal with monthly mortgages or on going repairs.
2. Getting started with real estate options doesn't require a
lot of cash. In many cases, we have controlled a $100,000
property for $10. This is especially important for a new
investor since startup capital is often an issue.
3. Options are great at generating quick cash. Once you have the
option locked up, you can market the property to create quick
cash. You should focus on making at least $5,000 per option
deal, and there's no practical upper limit to how much you can
make (one of our colleagues made over $300,000 on a land option
deal)...all without having to deal with tenants, repairs or
holding costs.
4. Using options is a great way to enter the luxury home market
or control properties in hot markets. Since these are higher
priced homes, you should expect to pay a higher option fee. We
have controlled $500,000 properties using $100 to $1000. In many
markets, a $500,000 is a starter home but the point is that you
can control a lot of real estate for a very modest fee.
5. Options are scaleable because a single real estate option can
be used to control a small deal or a large one.
6. Options offer multiple exit strategies. You can either
exercise the option to buy the underlying property; you can sell
or assign the option to another party; or you can ensure that
the seller has to pay you off because the option creates a flaw
in the title.
7. Using options allows you to convert dead leads into viable
ones. For an experienced investor, this alone can add tens of
thousands of dollars to his business because most deals that are
not viable with other techniques (foreclosures, short sales,
etc.) are often great candidates for real estate options.
8. BONUS REASON: Real estate options are very flexible and can
be used with all types of properties including single
residential homes, multi-units, apartment buildings, commercial
properties and land. You can also specify the option period,
which offers additional flexibility. In many cases, you can even
extend the option period, often for an additional modest fee.
In summary, using a real estate option is an ideal investment
technique for beginners because options don't require much cash
and can generate cash quickly. For advanced investors, using
options to convert dead leads into deals can add tens of
thousands of dollars per month.