Press Releases

Bellevue, Wash. (November 5, 2007) – According to RealtyTrac, foreclosures jumped 30 percent from last quarter. While this usually makes properties more affordable for buyers, today’s scarcity of credit makes home ownership difficult for those with limited assets.

According to David Nilssen, president and CEO of Guidant Financial Group (Bellevue, Wash.), this situation presents a golden opportunity for both buyers and sellers via an often overlooked strategy of the real estate market: the “lease option” (a.k.a. “lease to purchase option”). It also presents a unique possibility for homeowners facing foreclosure to remain in their homes.

Nilssen, who helms one of the country’s leading providers of self-directed IRAs, reports that many clients have discovered that lease options can help them avoid losses on moribund properties while generating income and lending a hand to potential home buyers as well as homeowners facing foreclosure.

“Our clients have been snapping up pre-foreclosures at below-market rates with their self-directed IRA funds,” he says. “Many investors initially chose to offer potential buyers lease-option arrangements as a means to increase profits during a slow housing market. But now, some are actually preferring to hold onto properties and collect monthly payments with the possibility of a sale to the tenant-buyer down the road at a prearranged price.”

Nilssen also emphasizes that many investors are attracted to lease options because this arrangement enables them to help homeowners facing the possibility of foreclosures, especially due to ballooning mortgage payments, while still making a healthy return on their investment. “In this situation a lease option allows the homeowner to stay in their home, free themselves of an adjustable rate mortgage, and look forward to the day when they can re-purchase their home,” says Nilssen. “Of course, these investments must be made at fair market value, but there are few investment opportunities out there that can match the financial and emotional rewards of lease options.”

Guidant client Ron Kuhlman (Brooklyn, Mich.) purchased a home from an acquaintance who was facing foreclosure. “I knew he was a quality guy and he would get back on his feet. So I set up a lease arrangement with the understanding that when he gets his credit repaired... he would buy the house back. I would extend a portion of his rent payments and hold them so I could provide him with a portion of his down payment.”

Kuhlman reports that his investment is providing a good return. “I bought the house for under $150,000, I’ve been receiving $1500 a month in rent and have been setting aside $250 in escrow. So it’s working out to be about a 15 percent return on my investment, and it’s secured by real estate.”