Lease Option( Sandwich Lease)
Hello,
Needing a little help here. I have a person that wishes to purchase a home No money down, needs or would like to have a payment around 550 to 600 max if possible. Also they have 3500 down.
Ok, now, I am looking for a home with a motivated seller first day out I found a few.
I found a home seller asking 44,000 for is very open to Lease Purchase!!!
ALso, I informed Him as I was testing the water so to speak that my intent in buying the home was to make it a rental and or fix it up and sell it.
That if I did a L/O I would want to sublet it, He was more than willing to do so.
Ok, guys, how can I make this work, I see a deal here but put the pieces together for me or point me the right direction.
Mark <IMG SRC="images/forum/smilies/icon_biggrin.gif">
[ Edited by MarkB on Date 01/22/2003 ][ Edited by MarkB on Date 01/22/2003 ]
let's see...there a lot to cover but i'll try to set u in the right direction. You have read something on the subject yes?
what rent will that house command usually? does it need work? is there a mortgage?..get the idea? u take it from there
then...make sure u're talking the person that can sign the papers and that there aren't others involved...like sister's etc. Get as long an option period as u can with the right to sublet and assign ..BUT be careful, if there's a mortgage, tops is 3 years (i believe) otherwise the bank MIGHT call the loan due (very rare but nonetheless)...what else..ask for 100% rent credit if u exercise and negotiiate from there - (if he doesn't say yes)...
get a signed deed into open escrow...memories falter incredibly sometimes...
what else...when u l/o it to u're t/b'er use separate rent and option agreements making option tied to performance on rent contract.... do a credit check!! - people who've had a difficult time might be ok (if they make enough)...professional deadbeats aren't...rent credit? up to u...
oh..and get a lawyer lined up to look over u're paperwork (has to be state specific)..
if u don't already have it get conti/finkels free ebook at their site - (do a search on google...)...
good luck
J.[ Edited by JohnC on Date 01/22/2003 ]
Ok, Yes its the OWNER
Also, Yes, I am reading in fact I have purchased a course wont mention whos cause I feel its a good course only some areas it doesnt cover in detail of which a Sandwich lease is one.
I am thinking as this deal evolves that maybe simply doing a lease option with right to sublet.
Might I ask a question about Sublet?
To sublet, Does this mean I must allow my tenant of which I sublet to also to do a L/O or could I simply rent property?
Forinstance; I L/O then rent the property (also if I rent it being a lessee with right to sublet can I rent to section 8 tenants?
ok..first off you must ALWAYS get the right to sublet the property...or you won't be able to get another person in there. Same goes for right to assign( /and assigns). You can do whatever..you can either put a person in on straight rent (no option) and in this case it isn't a sandwich lease or offer them an option as well (at higher terms than what your paying aka sandwich lease). Section 8? don't know what the requirements are but I don't see a problem as you have exclusive control over the property. Remeber though to protect your position somehow regarding your option - just make sure you don't go waking up bank clerks who have had a bad day - this is a matter of dispute as IRS doesn't consider an option a sale - but if the terms are too long they will construe it as an installment land contract ie a sale meaning the dos MIGHT be called by the clerk we mentioned earlier. Just make sure you make your payments ON TIME even if the tenant doesn't (if that happens immediately take action)
Good Luck
J.
reread the conti finkel book...it does cover sandwich leases.
Thank You,
This Deal is getting more interesting as it goes along.
I have found out through the Owners Lender that the Owner is 6 payments behind not 4 as I was first told.
He owes 2058.00 not 1504.00.....
Also the Property is no longer in the operation in the lenders credit department but is now moved to foreclsure recomendation. Meaning they are about to Foreclose on it unless all payments are made up.
However, it has not yet been turned over to an attorney thus I asked if I was to pay up the back payments would they still move forward they said no, they would not.
So as it is, if I could come up with 2058.00 I could purchase the house.
That is a problem as I dont have it......
But I might can get it so I will determine that tomorrow.
So thanx but I probably will pay the back payments which will be my down and he will owner finance the rest. In fact the Lender said they had no problem with that as long as they get theirs then go for it.
Mark
Mark B
STOP!!! DON'T PAYOFF THE BACK DUE! You just might send in the check and lose it as well as the property.
You're in a prime position to enter the world of preforeclosures. The owner hasn't been paying and is subject to lose the property shortly depending on the State you're in. Just negotiate a deal to get the deed and submit a contract for 50-60% of the mortgage balance due. Get the owner to sign over an Authorization for Release of Info to let the bank work with you regarding the unpaid loan balance. Then contact the bank with a request for a loss mitigation packet. Complete that with cooperation of owner and submit with your contract offer for 50-60% OF LOAN BALANCE. Have financing lined up, and if bank accepts then you just completed your first SHORT SALE!!
Steve
There is one way to do this without going to the bank and getting a loan which requires you to be personally liable for what sounds like your first deal.
1. Get the deed in a land trust, get a buyer lined up with several thousand down, who can pay a couple hundred more than the house payment, get your authorization form from the seller and sell the home to your buyer on a land installment contract for as much as you can above the loan payoff. Use a portion of the cash down to pay up the back payments. Legrand and John Locke can teach you how to do this.
2. If the equity is there, go for the same technique described by steve except don't use financing, flip the house on an assignment or do a double escrow w/ another investor's cash to close on the deal.
O.K. that was two different ways to do it.
I agree with Travis, get the deed and put it in a land trust as you as the beneficiary then I would flip it as quickly as you can.
Mark, I wouldn't let a tenant buyer the right to sublet because you can run into some legal problems by doing so.
i agree with clair...you should be the only one allowed to sublet - not your t/b'er...
wow, alot of info on this one, but it sounds like a winner. Just do it smart and figure out how to be on top with this deal. Cant go wrong with either suggestions above.. Good Luck