How Lease Options and “Subject To” Are Similar

For real estate investors that want to find deals that do not require the go through the hassle of applying and paying for a new loan each time they acquire control and responsibility for a new property, lease options and buying “subject to” the existing financing seem like great alternatives.

In this article, I’d like to share with you how lease options and “subject to” are similar and then in my next article, I will share with you some of the key differences.

First, with lease options and buying a house “subject to” the loan stays in the seller’s name. That means the loans on the property remains on their credit report.

Second, with lease options and buying a house “subject to” you usually make a monthly payment that covers the underlying loan for the seller. While this is not ALWAYS true, it is usually true that the seller wants, and often is able to get you to make, payments that pay for his entire principal, interest, taxes and insurance payment.

Third, with lease options and buying a house “subject to” you usually put very little, if any, money down. It is unusual to put down thousands of dollars as a deposit on either, however for the right deal it could make sense to do so. This is NOT to say that you do not need to put money into the deal on BOTH…

Fourth, you will usually need to spend money and time marketing to find motivated sellers that would be willing to offer a lease option or sell you their property “subject to” the existing financing. These are NOT usually advertised in the MLS. The lease options that are usually advertised in the MLS are by investors and these are not the ones you should be interested in.

Fifth, with lease options and buying a house “subject to” you get control of the property and should insist on locking the purchase price in at a fixed amount at the beginning.

Sixth, both… yes, BOTH can trigger the “due on sale” clause that is present in many loans. I will be discussing this in a future article in this series, so please read that for more information.

Until my next post,

James

P.S. Interested in learning more about these and other powerful real estate investing strategies? Upgrade to our Real Estate Investor Bronze Membership today and take your real estate investing business to the next level.

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