Real Estate Options: The Best Kept Secret to Making Money

Real estate investing is currently a very hot topic due to rising property values ​​and the number of investors looking for a safer alternative to the stock market.

In the last 10 years, stock investors have lost trillions of dollars in the stock market, so it’s understandable that they’re still scared to get back on the market.

Most beginning real estate investors often start investing in real estate through a rental property using the traditional method. That is, they make a 5% to 10% down payment and then borrow the balance from the bank. While this works, it requires more capital than most investors can initially raise, but more importantly, it creates unnecessary risk.

A better and lower risk way is to use a real estate option, which is possibly the best kept secret to making money in the industry. Having spoken to thousands of investors, I have found that probably less than 10% understand how to use this powerful technique. However, savvy investors like Donald Trump use real estate options in almost all of their transactions.

A real estate option can be used for multiple reasons (estate planning, speculation, etc.), but this article will focus on using a real estate option to generate quick cash.

Unlike stock options, which can be high risk, a real estate option is less volatile and offers some key advantages.

* A real estate option allows you to control a property without actually owning it. Ideally, you want to use an option on an owner-occupied property. Most homeowners are not trained to sell a home, and often cannot sell it within a reasonable amount of time.

Essentially, you use an option to control a property while you market it, and as soon as you sell it, you pocket the difference between the strike price (the price the seller agreed to sell the home for) and the sale price.

* When done correctly, you can get a real estate option on a property, market it, and collect on it in 30-45 days (I have a client who did it in as little as 4 days and made $9,800).

* By using options only on owner-occupied homes, you avoid many of the pitfalls of traditional real estate investing (vacancies, maintenance costs, mortgages, repairs, and tenants).

* Another big plus is that in any city, there are plenty of homeowners who would gladly let you opt out of their home, especially if you know how to sell it fast. The key is to demonstrate that you have a group of eager buyers who are ready to buy, and you can build this group of eager buyers through marketing and networking.

* The amount of money you risk is low because you can often trade a 90-day option on a $100,000 house for $10 (yes, ten bucks). If you can’t sell the house, then you’ll be out of $10 and some sweat. However, with each home you choose, you’re continually building a more comprehensive database of what your buyers want.

* Use of options does not require you to obtain a license. Starting today, you can go out and purchase an option on a property and start marketing it.

* Real estate options are very flexible because you can go for almost anything. While detached residential homes are the most common option, you can also purchase an option on land, commercial buildings, apartment buildings, and even trailer parks.

In short, using real estate options is not a well-known technique, but savvy real estate investors have been quietly using them to make a fortune for years.

Isn’t it time you did the same?

Copyright 2005 Alex Nghiem