Options Education

What and how much does the average Real Estate Investor or Real Estate practitioner know about Options? Even though there is a fair amount of general educational information and material available on the subject, it is surprising that so few Options are being used. Part of the reason for this is probably due to a shortage of specific, ["This is how you do it"], information and even more so, a shortage of Real Estate practitioners (Brokers, Lawyers, CPAs, etc.) who are knowledgeable enough about Options to give advice and guidance.

If these practitioners, and especially Real Estate Brokers, were to glean the education necessary to become knowledgeable in the use of Options, it would set them apart from the crowd and prove to be very lucrative for them.

I do not know of any Real Estate technique that compares with the “Option” when it comes to Leverage, Profit, Potential, Minimum Risk, Simplicity, Tax Benefits, and Flexibility.

Options can be used in almost any Real Estate situation; such as, investment properties and speculative endeavors. An old friend and mentor, Jack Miller, taught an exhaustive course on Options and their uses. Jack has since passed away; however, one might be able to obtain his instruction material from Common Wealth Press, P.O. Box 24837, Tampa, Florida 33623.

I think what I will do in a few Blog posts is show you some case studies of Options in action. The first one involves a 43 acre parcel of land which my company owned, fronting on Copano Bay in Rockport, Texas (on the Texas Coast). We had owned the property for some time and had anticipated developing it ourselves, at some point, but never seemed to get around to it. [You know what a Round Tuit is, don't you? We are all going to do something when we get one.]

Anyway we were approached by a Developer through a realtor who wanted to make an offer to purchase the property. This Developer planned to develop a mobile home park. Mobile Home parks do very well in this part of the country due to the thousands of “Snowbirds” that fly South in the winter. The Developer’s offer asked for a six month closing date with return of the Earnest Money if the Developer was unable to close due to financing or other problems. He also wanted the 6 months to do his Feasibility Study, and Engineering, etc.

We didn’t have any other potential buyers at the time so we decided to try to work with the Developer; however, we were unwilling to tie up the property for six months with no compensation. After some negotiation we agreed to give the Developer a six month Option to purchase the property. The Option fee was $10,000. In addition, if the Developer failed to exercise the Option, he agreed to turn over to us all his Engineering Work, Feasibility Study, Plats, etc., that he had done on the property.

The end of the story was that the Developer did not exercise the Option, therefore he forfeited the $10,000 plus the work he had done.

If you have some Option case histories, I would like to hear about them. Also, I would appreciate any other comments you would like to share with me.

These posts are the opinion of the author who is not engaged in rendering legal, accounting, or investment advice. If such advice is required or desired, the services of competent professional persons should be sought.