Leases and Options resemble interest-only Notes and mortgages with balloon payments when you come to think of it.  A properly drafted Lease incorporates a promise to pay with security for the promise in the form of some sort of collateral in the same way that a Note and mortgage do.  The Option requires a lump sum payoff - or another promise of payment - just like a balloon note.  Oddly enough, when people see a Lease and an Option, they don't perceive the possibilities for wrapping either - or both - of them.  Read on.

Let's stick with our illustration from the "Leveraging Vs Borrowing" Article for a little while longer.  Suppose the speculator with his $15,000 down payment obtained a 30 year, level payment loan at just 7%.  Most people would agree that this would have been an attractive source of funds and a reasonable price over the past few years.  But would it have been good for the speculator?

          In butcher shops it’s not uncommon to see a chart of a cow on which all of the cuts of meat are diagrammed.  The idea is that you’ll have a better  understanding of just what you’re ordering when you buy.  I look at potential real estate deals the same way.  If I were to chart the “cuts” on a house, ten of them  might include (1) Equity appreciation, (2) Tax benefits: (a)Depreciation write-off, (b) Section 121 Tax-free sale proceeds, (c) Section 1031 tax-free exchanges, (d) Amortization write-offs (3) Loan Pay Down, (4) Liquidity and Leverage via low cost loans, (5) Options, (6) Income from (a) leases and (b)sandwich lease; or from (c)installment sales, (7) Profit from (a) short term flips, (b) long term gain from sales, (8) Personal or Business use, possession, and/or occupancy, (9) Fixer opportunities, (10) Equity Sharing with Investors.  I’d try to structure both my acquisition and sale to give the minimum number of these “cuts” to a buyer, or leave them with a seller, and carve off the rest for myself through negotiation.

When houses are being sold within hours of being offered for sale, it's amazing how swiftly we forget how important marketing skills and techniques are to making money in real estate. Being able to market creatively is going to be critical to success and financial survival.