TMC #17 – Lease Options vs Owner Financing - Become A Real Estate Investor, with Brad Smotherman

Today we’re talking about why we don’t do lease options as a business model. Actually, the only times when we’re doing short-term lease option is when we’re transferring the deal to medium or long-term owner financing. So we want to compare and contrast lease options vs. owner financing and explain why we’ve chosen the latter.

What is Covered:

  • Pro-lease arguments and why they don’t really work
  • When having appreciation is not an advantage at all
  • Does it make sense to use depreciation for tax advantage?
  • What really happens when the deal goes bad and you’re on lease option
  • A potential benefit short-term lease option – double dipping
  • The benefits of owner financing:
    • There is not that much liability when holding notes as opposed to lease contract
    • There’s no vacancy in repair with owner finance model, whereas when you get the house back from a lease you always have to do some repair
    • You get big down payments so the foreclosures don’t hurt you
  • Owner financing is highly scalable
  • Con to lease option: from the buyer perspective, you have no control
  • Con to owner financing: it doesn’t seem real at first until you cash out the first time

So have a think about these arguments, and email us if you have a question you’d like answered on one of the following Tuesdays.