What’s Your Best Chances To Make Money in Real Estate Today? The Answer May Surprise You

Originally posted 2009-05-18 10:09:37. Republished by Blog Post Promoter

With any investment that you make your goal is to make money.  In today’s market, you can make money by offering rent to own.

With rent to own, you are still the owner of the home, but the occupants have equitable interest in the home just as your mortgage company does.  The rent to own can be utilized through a land contract or a lease option.  If you choose a land contract, then the occupant has equitable interest in the property.  If you choose a lease option, then the occupant does not have equitable interest in the property until such time the occupant exercise his or her option to purchase the property.

Another important fact is that if you choose a land contract is it important to do a judgements and liens check on the occupant before attaching the occupant to the property because the judgements and/or liens that the occupant may have can attached to the property.  Any title company can do this service for you for a fee.  You will need to get a name affividat from the occupant.  You will also have a closing just as you do when you sell the home.

What is equitable interest? Equitable interest is interest held by an equitable title.  The title indicates  beneficial interest in property and that gives the holder the right to acquire formal legal title.    If the occupant has equitable interest in the property then they have rights to the equity in the home.     Therefore, if the occupant does not pay, you will have to do a judicial foreclosure on the occupant.  

The reason that this option is profitable in this market is that the owner reduces his or her holding cost and get a potential buyer for the home some time in the future.

The terms of the lease option and land contract must be in writing.

Because the occupant has a written contract and equitable interest under the land contract, the occupant can file for tax exemption; thereby, reducing taxes for the investor.  The occupant must also record his or her land contract.  The recording of the land contract  with the assessor office will in most cases be handled by the title company.  As an owner occupied property, the occupant is eligible for exemption whereas the investor is not.  There are restriction to this so check with your state.

It is important to note that the occupant that is under a land contract will be responsible for taxes, insurance, mortgage, and interest to the investor.  The investor also can add to the contract that if at any time that the occupant does not have insurance on the property that the investor can add insurance at two to three times the cost until such time the occupant puts insurance on the property.

Lastly,  remember whatever changes that the real estate market presents there are answers.  In the 80s, the answer to the high interest rate was an assumable loan.  Today, the answer is owner financing whether it is lease option or land contract is up to you.

To learn more about the land contract, please read:

What is a Land Contract?

What is a Land Contract?

The land contract is intended to be a short term seller financing agreement between the seller and the buyer.  The buyer agrees to purchase the property for a pre-determine amount, and the seller allows the buyer to pay in installments over a specific period of time.  As a result of the seller providing the finance the seller still retains title and deed to the property.  The seller allows the buyer to take possession of the property.  The seller may also require the buyer to pay property taxes and homeowners insurance as part of their agreement.

The terms of the land contract are very important.  It is equally important to make sure that any agreement reached be in writing. 

The land contract gives the occupant equitable interest in the property, as well. 

It is also important to do a judgement and lien search on the occupant before attaching his or her name to the property.  The land contract is a sale and will close and be record just as any other sale.