Investment Basics: Real Estate Options

By Elsie Dudukovich0 Comments

In a nutshell, real estate options can be described as contracts allowing a party to purchase the right to buy real estate for a certain price on a future date set by both the buyer and seller.  If the option expires without being exercised, the optioner keeps the option fee. 

Advantages of real estate options according to realtor.com:

“Investors can use real estate options to secure high-profit investments at relatively low risk. Here’s an example: An investor notes that a specific plot of land is in a prime location for further development, such as subdivisions or a shopping plaza. Instead of purchasing the land outright and then selling it to developers, he purchases exclusive rights to the land through an option.

"With the option in place, he approaches investors and developers, offering them the land at a much higher price than his locked-in option purchase price. Once his higher offer is accepted, he either sells the option itself for the purchase price or purchases the land and then flips it to the developer, pocketing the difference.”

To see real estate option investing in action, check out our recent case study with Equity Trust client Aisha D. from Maryland.