A lease with an option to buy involves leasing a home from a seller who might not be able to sell it or rent it otherwise. It allows the investor to rent it and then buy it, without having to use money or credit. I was able to do this over and over again. I have bought and sold over 600 lease option (rent to own) homes. The technique of lease with option to buy is what helped me get going “full steam ahead” in the real estate business.

Investing using the subject to technique involves having the seller sign the deed of their home over to the buyer “subject to” the existing mortgage. The seller keeps the mortgage in their name, but the buyer/investor owns the home and is responsible for the payments of the mortgage. The investor does not have to qualify for a new mortgage using this method. The technique of subject to allows the seller to move on and get out from underneath their payments and the investor the ability to buy many homes without using his or her own cash or credit.

Both methods, when done properly, should result in a win/win situation for the buyer and seller. I only teach my students how to use these two methods in a fair and ethical manner. When all parties are treated fairly everyone wins and things work out for the best. I truly believe this is the only way to invest in real estate!

As an investor you must determine your bottom line to do a deal.  What is the profit you would expect, minimally, to do a deal on a lease with option to buy or Subject to investing technique?  For each type of investing technique you might have a different profit amount required.  For instance, I will accept less for a rehab than a lease option, because it can be completed and out of the deal within a few months, whereas a lease option I will be in the deal for 12-18 months or more.   Is your profit range for a deal $10,000, $50,000 or $300,000?   Once you determine your bottom line then you can determine what you will and will not do for a deal.   For instance, if your bottom line is $20,000, and a deal comes along that will only provide you with $18,000, then you need to pass that deal up, or negotiate more to get you your bottom line, otherwise, it is not be a win/win with the seller and yourself.   You also might be able to wholesale it to someone else who has a bottom line that is less than your bottom line, but you will need to learn to walk away from deals that don’t work for you.

To learn more about determining your bottom line take a look at my book Investing in Real Estate with Lease Options and Subject-to Deals.