San Marcos, CA (PressExposure) February 26, 2009 -- Meridian Pacific Properties announces its new Lease Option program. Meridian's Lease Option program provides investors investment property with tenant-buyers already living in them. With this program, the tenant pays a non-refundable option deposit (the "option consideration") to the investor, signs a two year lease, and has the option of buying the house during the 2 year period for a pre-agreed price, typically at least 10% more than the investor's purchase price. Benefits include:
1.The investor/owner gains a solid tenant. Since the tenant anticipates someday owning the home, vacancy is usually zero. The tenants also see themselves as homeowners, so they typically take much better care of the home. 2.It is likely that rent will always be paid on time. The tenant is working to improve his or her credit so they can buy the home, payment problems will adversely affect their credit and may ultimately prevent them from purchasing the home.
3.Lower property management fees. We've negotiated a 7% property management rate for lease options. Property managers prefer lease option tenants as they are easy to manage and have fewer issues.
4.The tenant pays the first $1000 of any maintenance issue, so the investor's maintenance costs are likely to be zero.
5.The investor has a solid exit strategy: the house, in a sense, is already under contract to sell - in 2 years. The house does not sit idle for months at a time, with no income while the investor tries to sell it thorough traditional channels.
6.The sale price is pre-determined and agreed upon by both parties at the time the option is written, which is typically the full appraised value of the property plus an allowance for reasonable appreciation. Returns are predictable.
7.If the option is exercised by the tenant, the investor is able to sell the house without any real estate sales commission (instead of the typical 6% of the purchase price.) In addition, the investor avoids having the property sit vacant while the home is being marketed for sale while paying holding costs without collecting rent.
8.If the tenant doesn't buy, the investor still benefits. The investor keeps the option consideration, has generally received higher-than-market rents, and the house has likely appreciated. The investor may decide to continue to rent the home and/or extend the lease option (for an additional fee and at a new sales price), or place new lease option tenant in the home. In both cases the cycle continues and the investor benefits.
Lease options are a great alternative for investors looking for shorter term investments, as lease options typically run for two years. Best of all, the projected returns are generally 20% or more annually after accounting for costs associated with principal, interest, taxes, insurance, maintenance, vacancy, property management, and acquisition and sales costs.