A buyer pays $20,000 today for the right to buy a $500,000 house anytime in the next 20 years, but can't exercise it for five years. The seller keeps the $20k and stays in the house. Most options never get used, making them tradable assets that can be sold to someone else.
Nathan, if I gave you $20 grand right now today to fix your house that's currently worth half a million dollars and you give me the next 20 years to buy your house for half a million dollars minus what I already gave you as option consideration, I'll allow you to stay there for at least 5 more years until your kids have graduated and they're gone. I have a 20-year option I cannot exercise for the first 5 years. After that, I can exercise any time in our agreed-upon timeframe. The majority of options don't get exercised. Options are used as a currency. I could trade that option to somebody else. I could sell that option to somebody else. You as the homeowner may approach me in 2 or 3 years and say, you know what, Derek, we want to keep our house. We're back on our feet. What do we need to do to buy your option back? So it's a currency.
Why Traditional Wholesaling Keeps Failing You (Use This Pre-Flip Method Instead)
