Lease Options & Subject To – The Best Strategies to Make Money on Properties with No Equity

Lease options and subject to real estate investing deals offer great ways for investors to enter real estate investing with little or no money. At Real Estate Investing Women (REIW), we know it is challenging to find money for new investments. We’re here to help you find creative strategies to invest.

As a new real estate investor almost 30 years ago, I did not have the money or equity to invest in new deals. I knew if I wanted to make money and gain the financial freedom for bigger investments, I needed to find a way to invest without a down payment.

Lease options offered that way! I quickly begin to accumulate properties, both single family and multifamily investment properties. My income grew and within a year and a half I had a steady monthly income and the potential to grow my real estate investing business even more.

You too can find financial freedom using lease options and subject to investment strategies. Even in times of economic uncertainty, real estate investing offers a solid path forward. At REIW, we are here to walk alongside you to help you learn and find a supportive community of likeminded women real estate investors.

What Are Lease Options for Real Estate Investing?

Lease options differ from traditional leases because they give the investor the option to purchase the property. With a lease option the investor has more control of the property without officially owning the property.

With a lease option, the investor isn’t responsibility for the loan. Instead, the investor pays an agreed to monthly amount to the owner but can then extend the lease to a different tenant. The investor finds a person to rent the property and cover the monthly rental cost.

To make money with a lease option the investor must find a renter to pay more than the amount the investor agreed to with the property owner. For example, if the investor agreed to pay $1500 each month but finds a tenant to pay $1800 each month, the investor makes a monthly income of $300 for the property.

What Are Subject To Deals for Real Estate Investing?

Subject to deals work similarly to lease options with the exception that with a subject to deal the property title transfers to the investor. With a subject to deal, the investor can extend a lease option to a tenant buyer.

A subject to contract stipulates that the sale is “subject to” the existing mortgage remaining intact. This allows the investor to take over the property without having to secure new financing.

Just like with the lease option, the subject to deal produces a monthly income when the tenant pays more in rent than the investor pays for the mortgage. Plus, with a subject to deal, the investor has the option to refinance the mortgage.

How to Make Money Using Lease Option and Subject To Strategies

When you combine the lease option and subject to strategies, you open the door to more financial gain. There are three main ways to make money through this strategy combination.

1 – At the Time of Purchase

When you purchase a subject to property your goal is to simultaneously line up a lease option tenant. You will need to pay a deposit for the deal but will also receive a deposit from your lease option tenant.

If you time this correctly, you cover your deposit with the payment from your tenant. Aim to charge more for the tenant deposit than you owe. For example, if your deposit amount is $7000 and the tenant pays you a deposit of $10,000, you make $3000 in the deal. Plus, you can cover the deposit you owe with the tenant’s payment.

2 – Monthly Rental Payments

As part of the deal you owe the seller monthly payments to cover the mortgage cost. This is an agreed to amount when you sign the contract. To make money monthly, you need to charge a higher monthly rate to your tenant than what you owe to the seller.

As we discussed above, the difference in the amount you receive and the amount you pay becomes your monthly profit for the property. This is also one way to create passive income through real estate investing.

3 – At the Time of Sale

Finally, you make money with these types of deals at the time of sale. When you sign the contract at the beginning of the deal, you agree to a purchase price with the seller. When you sign the contract with the tenant buyer, set the purchase price higher.

Gain Wealth with Real Estate Investing

When you consider all three ways of making money over the life of the deal, you have the potential to grow your real estate investing income. As you acquire multiple properties through these methods, you have both monthly passive income and bigger one-time payments.

Combining strategies and using creative financing options is the key to building both your real estate investing business and your wealth. Remember, the goal is to charge more to the tenant or tenant buyer than you agree to pay to the seller.

Connect With REIW

At REIW, we help women investors grow your business through a variety of resources. Check out our free online resources, like blogs, videos, eBooks and podcasts. You also have the option to sign up for paid training or join the REIW community for even more resources. Contact us today to learn more about REIW and creative investment strategies.

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