I understand the principle of a lease-option deal, but just finished a book that suggested using a lease-option on both sides of the transaction. In other words, lease a home (no money down) with an option to buy, then find a tenant to lease it with an option to buy (at a higher rent and price), who gives you a big option fee up front. Have any of you had experience with these, and with what results?
The authors use examples where they put no money down, then collect $8,000 to 15,000 as a non-refundable option fee (applied towards the purchase price, of course). It seems it would be difficult to find sellers that will lease to you for years while letting you sub-let it, and really tough to find buyers with money for large option fees that wouldn't just go out and buy a home. Any success stories here using this method?
This technique does work and works pretty well. It is often referred to as a sandwhich lease option. Many lease option investors are using this technique now because it makes it possible for the original homeowner to benefit instead of signing the property over subject to. You still obviously want to make the most on the deal but i would use this technique when the original home onwer does not want to give you the home subject to.
There are a few programs out there offered that actually take care of all the paperwork needed to do this type of deal. I believe the program I have is called AutoForms but i could be wrong on that. i have not used the prgram in 3 years but it worked well when i did use it. if you do end up spending money on the software, obviously make sure you review everything with your lawyer.
I have actually interviewed several lease option investors who work sandwhich lease option deals at my website. the technique is a good one but I encourage you to learn more before you take the plunge.
As mentioned above, any time you add a Lease to Purchase option to a residential lease agreement, you need to have an attorney look over your documents. The last thing you want is to be stuck with this property or not be able to free it to your tenants!
This is one of those opportunities for those with little cash to invest, but it requires patience and good legal protection. You need to make sure that the person giving you the lease makes their payments (if its not free and clear). Generally, it is a good idea to have an escrow company handle all of the transactions.
The sandwich lease option is an excellent way to invest in real estate while helping the seller sell and helping someone who does not qualify for traditional financing get into a home of their own.
I believe this is the best investment technique in the real estate market today, as an investor I want to avoid risk and liability. Risk is when I have to use my money and liability is when I finance a home in my name.
it is vital to do all the correct paperwork, make the payment directly to a title company to keep everyone honest, put your monthly positive cash flow in an escrow account to protect the property and the money you are going to give back to the buyer into an escrow account to have a fund in case the buyer stops paying.
The sandwich lease option allows me to invest in real estate while helping buyers and sellers at the same time, all other ways to invest out there in the market today are about getting a property as cheaply as possible regardless of the effect it has on the seller.
Making a difference will get me buyers and sellers coming to me because of the benefit for them, everyone knows someone who can't sell their home because they are under water or a buyer who doesn't qualify for bank financing. I get to work from home
I get to work part time and last year I made $96,833.00.
This investing technique is the future of investing and even if someone owes more than a home is worth the longer it takes to build equity the more money I make from the monthly income I receive.
Full disclosure is very important, the benefits for the seller even if it takes longer for the price to go up and we extend the lease option the seller will avoid short sale, foreclosure or bankruptcy and continue to receive the benefits of the tax write off without the headache of being a landlord.
the benefits for the buyer is they build up down payment, build their credit and the longer it takes for the value to increase the more money they save and the more they are able to build their credit and the better loan they will get.
So with the lease option everyone wins and it doesn't matter if the seller owes more than the value because the future value required in the contract and the required value in the contract for the buyer makes it so everyone will profit it is just a matter of time.