How to profit from Lease options and Seller financing deals.

[Reggie Williams]

Hello BP,

I'm new to real estate investing. I understand how investors make money with a simple assignment fee.

My question is this, how do investors make money from lease option deals and seller financing deals? What do the numbers looks like on seller financing and lease options?

Thanks in advance for  you input.

[Alexander Robinson III]

Brian is right. A wrap is the way to go. If you don't know what a wrap is, it's called a wrap around mortgage. This means you take over the payments of a homeowner and get the deed to the property. 

For you to make money off of a Wrap Around Mortgage, you enter into an agreement (contract) with the seller to take over payments of the house. Let's say the seller still owes $150,000 on the property to their lender. You find a buyer who is willing to pay $15,000 down (10% of what the seller still owes) on an option to buy and have the buyer pay you a monthly payment. 

The monthly payment is the amount the seller pays a month, plus the amount you add to make to earn a monthly cashflow from the deal. So if the payment for the seller is $700 a month, you would have the buyer pay $900 a month. You keep the $200, pay the seller the $700 so they can make their payment to their mortgage company and repeat until the new homeowner pays off the house.

In the event the buyer does not pay off the house in the amount of time agreed, or does not decide to renew with lease option, you can find another person willing to purchase the house, have them provide a down payment, and start the process all over again. The point is that the house needs to be paid off. The seller does not have to do anything but collect the check and send it off to their mortgage company. They are happy most of the time just to pay off the property.