The Seven Most Profitable Types of Properties to Buy Options On

The real trick to being a successful option investor is in knowing which properties to put under option so that you can create instant equity without having to spend oodles of time and gobs of money on an extreme property makeover. And over the years, I have been able to take the same derelict properties, which most uninformed investors reject out of hand as being hopeless cases, and by using just a smidgen of imagination and some old-fashioned creative thinking,

I have turned them into profitable option properties. From my experiences, the seven most profitable types of properties to buy real estate options on are:

1. Properties that can be rezoned for more profitable uses.
2. Small mismanaged rental properties that can be turned around.
3. Properties condemned for demolition because of code violations.
4. Dirty, filthy, run-down properties that can be cleaned up.
5. Properties with correctable problems that make them non-marketable.
6. Properties that have been stigmatized.
7. Properties with obsolescent f laws that can be put to other uses.

What the preceding seven types of properties have in common is that they are all well below the radar screens of the so-called big guy investors, such as publicly traded real estate investment companies, and they usually:

1. Belong to absentee owners.
2. Are in a filthy, neglected, run-down condition.
3. Have f laws that make them non-marketable.
4. Are not being put to their most profitable use.
5. Can be bought at prices at least 20 percent below their current market value.
6. Have immediate resale profit potential when marketed to a targeted group of prospective buyers.

In most real estate markets nationwide, savvy, knowledgeable real estate option investors who really know what they are doing have very little real competition from other individual real estate investors for these types of properties.

This is because the average real estate investor is not very sophisticated when it comes to putting relatively complex deals together. Plus, they are generally intimidated by any property other than a single-family house or duplex and are reluctant to make offers on properties that are not for sale by the owner or listed with a broker.

TWENTY-FOUR GOOD REASONS TO BUY OPTIONS INSTEAD OF PROPERTIES

I am willing to bet anyone an ice cold case of Beck’s Beer that the numerous commercial real estate market meltdowns that have occurred during the past 30 years would not have been so severe if the high rollers had bought more real estate options instead of properties.

In this way, if they did not want to exercise their real estate options, they could have simply let them expire, and that would have been the end of it. And they would not have incurred any of the transaction, maintenance, management, holding, and debt service costs that eventually forced them to go belly-up.

In other words, they would not have been saddled with the financial responsibility and personal liability that go along with outright property ownership, and they automatically would have avoided having to:

1. Fill out intrusive loan applications.
2. Qualif y for new loans.
3. Make monthly loan payments.
4. Circumvent loan due-on-sale clauses.
5. Worry about liability lawsuits.
6. Support negative cash f lows.
7. Contemplate being foreclosed on.
8. Collect tenant rental payments.
9. File tenant eviction lawsuits.
10. Chase deadbeat tenants.
11. Go into debt.
12. Buy any property.
13. Pay outrageous loan fees.
14. Assume existing loans.
15. Make expensive property repairs.
16. Babysit tenants.
17. Fret over escalating property taxes.
18. Fill vacancies.
19. Pay exorbitant property insurance premiums.
20. Maintain property and tenant records.
21. Clean up after messy tenants.
22. Pay transaction costs.
23. Assume financial and personal liability.
24. Manage property.