A lease option, also referred to as rent-to-own, is a transaction that includes two agreements:
- The first agreement, the lease, is a rental
agreement between you and the owner. If possible, get the seller to agree
on having a portion of the monthly rent go towards the balance you owe on the
- The second agreement, the option, states that the owner agrees to sell you the property at a specific price within a certain time-frame. The owner cannot sell the property to anyone else until the time limit is up or change the price of the property.
Becoming an owner-occupant is a good option if you want to invest in a home you plan on living in before turning it into a rental property. You usually have to live in the property for at least a year before you can rent it to someone else. The down payment usually corresponds to 20% of the value of the property, but you might be able to negotiate better terms with the seller.
You can build a solid portfolio by purchasing a new rent-to-own property once a year. Revenue from your rentals will add up and provide you with the capital you need to make down payments on new properties.