Overall, a real estate option is a specially designed contract provision between a buyer and seller. The seller offers the buyer the opportunity to buy a property at a fixed price for a certain period of time. The buyer acquires the possibility to buy or not to buy the property until the end of the holding period. For entitlement to this option, the buyer pays an option premium to the seller. If the buyer decides to buy the property (in other words, to exercise the real estate option), the seller must sell the property to the buyer under the terms of the existing contract. They can be seen as a kind of contract without an order between two parties. There is no exchange market for this type of options, but there may be creative arrangements that could eventually allow a buyer to sell the option while still in active holding. Typically, a buyer must pay a specific premium during the holding period, which can help reduce the purchase price. They can also allow the buyer to obtain better mortgage financing terms that reduce the total cost. During the holding period, a property can gain in value even if the purchase price is the same. There are several ways to invest in real estate.
For many Americans comes the most fundamental real estate investment in the form of a detached house or rental property. Investing in a single property can be a significant and lucrative investment with several possibilities of use. Versatility, longevity and appreciation are often the main reasons that, over time, make individual real estate investments relatively safe, reliable and profitable.