What and how much does the average real estate investor or real estate practitioner know about options? Although there is a good deal of information and general educational material available on the subject, it is surprising that so few options are used. Part of the reason for this is probably due to the scarcity of [“This is how you do it”]information and even more, a shortage of real estate professionals (brokers, lawyers, public accountants, etc.) who are knowledgeable enough about the options to provide advice and guidance.

If these practitioners, and especially real estate brokers, got the necessary education 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 know of no Real Estate technique that compares to “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 ventures. An old friend and mentor, Jack Miller, taught a comprehensive course on Options and their uses. Jack is already deceased; however, one could obtain his instructional material from the Common Wealth Press, PO Box 24837, Tampa, Florida 33623.

I think what I’m going to do in a few blog posts is show you some case studies of Options in action. The first involves a 43-acre parcel of land owned by my company, facing 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. [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 real estate agent 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. Developer’s offer called for a six-month closing date with return of Earnest Money if Developer was unable to close due to financial or other issues. He also wanted the 6 months to do his Feasibility Study, Engineering, etc.

We didn’t have any other potential buyers at the time, so we decided to try working with the Developer; however, we were not willing to immobilize the property for six months without compensation. After some negotiations, 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 did not exercise the Option, the Developer agreed to deliver to us all of his Engineering Works, Feasibility Study, Plans, etc., that he had performed on the property.

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

If you have any option case histories, I’d love to hear about them. Also, I would appreciate any other comments you would like to share with me.

These publications are the opinion of the author who is not engaged in providing legal, accounting or investment advice. If such advice is required or desired, the services of competent professionals should be sought.