Real Estate Options
by Alex Nghiem
Real estate investing is currently a very hot topic because
of the increasing property values and the number of investors
who are looking for a safer alternative to the stock market.
In the last 10 years, stock investors lost trillions of dollars
in the stock market, so they are still understandably skittish
about returning to the market.
Most beginner real estate investors often start in real estate
investing by a rental property using the traditional method.
That is, they put down 5% to 10% and then borrow the balance
from the bank. While this works, it requires more capital than
most investors can initially raise, but more importantly, it
creates unnecessary risks.
A better and lower-risk way is to use a real estate option,
which is arguably the best kept money making secret in the industry.
Having talked to thousands of investors, I have found that probably
less than 10% understand how to use this very powerful technique.
However, savvy investors such as Donald Trump use real estate
options in almost all of his deals.
A real estate option can be used for multiple reasons (estate
planning, speculation, etc.), but this article will focus on
using a real estate option to quickly generate cash.
Unlike stock options, which can be high risk, a real estate
option is less volatile and offers some key advantages.
* A real estate option allows you to control a property without
owning it. Ideally, you want to use an option on an owner-occupied
property. Most homeowners are not trained to sell a house and
often end up not being able to sell it within a reasonable time
Essentially, you use an option to control a property while
marketing it and as soon as you sell the house, you pocket the
difference between the strike price (the price the seller agreed
to sell the house for) and the selling price.
* When done properly, you can get a real estate option on
a property, market it and cash out 30 to 45 days (I have a client
who has done it as little as 4 days and made $9,800).
* By using options only on owner-occupied homes, you avoid
many of the drawbacks of traditional real estate investing (vacancies,
holding costs, mortgages, repairs and tenants).
* Another huge advantage is that in any city, there is a large
number of homeowners who would gladly let you option their house,
especially if you can know how to sell it quickly. The key is
to demonstrate that you have a pool of eager buyers who are ready
to purchase, and you can build this pool of eager buyers through
marketing and networking.
* The amount of money you risk is low because you can often
negotiate a 90 day option on a $100,000 house for $10 (yes, ten
dollars). If you can't sell the house, then you are out of $10
and some sweat equity. However, with every house you option,
you are continually building a more complete database of what
your buyers want.
* Using options doesn't require you to get a license. Starting
today, you can go out and acquire an option on a property and
start marketing it.
* Real estate options are very flexible because you can option
almost anything. While single residential homes are the most
common thing to option, you can also purchase an option on land,
commercial buildings, apartment buildings and even trailer parks.
In summary, using real estate options is not a well known
technique but savvy real estate investors have been quietly using
them to make a fortune for years.
Isn't it time you did the same?
About the Author: Alex Nghiem is the co-founder of Wealthautopilot,
which provides coaching and educational products/events for real
estate investors who want to turbo charge their results immediately.