Remember The “Lease Option?”

Apparently some smart investors do remember the Lease Option.

Tim Cabrera in Lithonia, Ga. saw the unwanted artwork gracing the interior walls of the house his company just bought: Long streaks and swirls of red and blue spray paint.

The graffiti was probably the work of neighborhood kids and stretched from the kitchen to the upstairs bathroom of the foreclosed home. Even the carpeted staircase had been tagged.

“Unbelievable,” said Cabrera, chief operating officer of Atlanta-based Pride of Ownership Partners. “They got into everything.”

In foreclosed and forlorn properties like this, Cabrera and his firm see opportunity, and not just for themselves. They’re fixing up the place and others like it and marketing them to people who want to buy but can’t get mortgages.

Enter the lease-purchase option, which is surging in other hard-hit states like California, Florida and Nevada. Why wouldn’t it be? It’s the only real common sense plan for trying to get people into a home that would otherwise be vandalized more and continue to drain income from it’s owner.

“At a time when we have both distressed sellers and distressed buyers, I think it makes total sense.”

Customers like Cecelia Robinson, 57, a writer who said she fled her home near Baltimore after a bad business move left her on the verge of foreclosure. Pride of Ownership partners is leasing Robinson a three-bedroom, 2 1/2-bathroom home that the company purchased from a bank and renovated.

For three years, Robinson can continue paying rent or opt to buy the house for the price an appraiser set at the time she moved in. If she chooses the latter, the company will give her a down payment credit totaling half the rent she’s paid over that three years, even if she decides to buy sooner.

“It’s a fresh start,” Robinson said.

To be sure, the arrangement is potentially a profitable one for Cabrera and his partner, real estate investor Jeffrey Britz, who say they started last July with $1.4 million in capital and have snapped up 50 foreclosed homes across the Atlanta area. The market is still shaky, and for now, they can’t sell the homes at a profit.

Part of the solution involves helping clients qualify for a mortgage. Cabrera, who worked as a mortgage broker during the real estate boom, knows just how difficult this has become. That’s why new clients are also required to go through a credit rehabilitation program to participate.

“It’s going to help them, give them stability, let them raise a family,” Cabrera said.

Right now his company is about breaking even; he won’t turn a profit until he can start selling the homes.

Pride of Ownership clients go through a rigorous screening process, Cabrera said, and by getting clients into fixed-rate mortgages and making it clear up front how much they’ll have to pay, he hopes to turn his renters into secure homeowners.

“There are smart people out there,” Cabrera said. “The premise of Pride of Ownership is to educate people so they know what they’re getting into.”

The Lease Option is another tool in an investors tool box that must be used in these tougher financial times. People are hurting and it’s time to pull out the old trusty “Lease Option” for getting those properties occupied and at least not draining the money from our pockets.

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