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Real estate options are contracts that give you the right, but not the obligation, to buy or sell a property at a predetermined price within a specific time frame. Here’s how you can use them for profit:
How Real Estate Options Work
Option Fee: You pay a fee to the property owner for the option to buy the property later.
Option Period: You have a set period during which you can decide to buy the property.
Exercise the Option: If you decide to buy, you pay the agreed price. If not, the option expires, and you lose the fee.
Example
Find a large piece of property in the path of development. Draw up an Option Contract offering to pay X for the property one year from now. Once under contract, take steps to increase the value of the property, such as get zoning changed to residential. Sell to a developer. Close on your purchase with a bridge loan and then close on your sale.
