Options - Real Estate

Carlton Sheets Alternative

Credit Repair

Principles of Success

Real Estate Investing Info

Order

Contact

There are options, and then there are options. Sorely misunderstood by many, real estate options can be one of the most profitable investment vehicles ever devised by Man.

There are plain old options. There are rolling options. And lease options. Even "sweat" options. And every one has great potential for huge profits.

One fellow heard a company was looking for a place to build their second theme park. He invested his 401(k) into an option on a swampy section of land in Florida, then convinced the company it would be the perfect location. It was, they bought the land, and the fellow who had the option put a few million dollars in his pocket. And Disney World became a reality.

A real estate option is simply an agreement that gives you the right - but not any obligation - to buy a certain property at any time during a certain timeframe, at a predetermined price. If you can sell at a profit later on, you would exercise your option, then flip to the next buyer. For example, you learn that a new shopping mall may be coming into a certain area. You get an option on a piece of land in that part of town. Currently, the land is worth $100,000, which you would pay if you exercise the option. The mall does get built, the surrounding land is rezoned and property values triple. You exercise your option and flip it to another buyer for a huge profit.

The cost of an option can be as little as $1.00, though most real estate option fees are higher, determined in part by the value of the property. You can see how a very small amount of money can become a real windfall, almost overnight.

In some cases, you can get an option, then apply for rezoning. Once rezoned, the value of that property should increase substantially.

There are different types of options:

• Standard real estate option, described above
• Rolling option. A developer would take out a rolling option on a large tract of land that has been divided into lots. The actual option would be for Lot #1. Once he sells (or builds on it and sells) that lot and makes his profit, the option automatically "rolls" onto Lot #2, and so on. If the lots stop selling, he simply stops exercising his option.
• Lease option - discussed here
• Sweat Option - you buy an option on a vacant property in need of repairs. Your option is worded to give you the right to make the repairs, and perhaps even the right to live in the property rent free - in fact, the cost of the repairs could be your option fee. Once the property is repaired and the value substantially increased, use the double escrow to flip the property to another buyer, and pocket the profit.