Question Re: How Lease Options Work.
OK, I have found a property that I may be interested in. It has about $15K equity in it. It is being offered by a group that buys foreclosures and then wholesales them to investors. One of the options they have for purchasing these homes is a lease option. How can you lease option (to a 3rd party) a lease optioned home? My most important question that I want answered is how does the cash flow work? How much extra would I have to collect in rents to make whatever margin they are asking + what I need? AND, is this a smart thing to do? Thanks.
oh boy thats weird?!
to lease option a home thats currently leased optioned... hrm??? unless they have simply an option on the home and not paying lease... thats a possibility, but leasing and already lease optioned home is beyond my experience. i'd like to know more too.
[addsig]
Called a sandwich lease. I have never done it but some people profess it to be an easy way to make money using very little money and pretty houses. The basics, from what I gather, are to have your lease with the seller allow sublet. You try to give the seller very little option money and you want a longer period of time to exercize the option (3-5 years). The lease where you are the seller gives you quite a bit of option money and you want a shorter peiod of time to exercize the option. Catch is to trust your seller and to make your payments directly to the mortgage company. Any extra can then be made to the seller. Seller needs to be caught up on his mortgage and not be in financial trouble as a bankruptcy will make things messy. You should also record something at the court house to say that you have an interest in the house so that the seller can not sell it or get another loan against it. Possibly get a title search and call the mortgage company to make sure they are current.
Brenda
to know your rent market is paramount..if you buy on a lease/purchase then turn around and lease/purchase out is a sandwich lease, and can be done, just make sure you can sub-lease purchase out on your original lease.. however, dealing with professional investors you may run into a problem getting more rent from your end T/B, as the investors have probably maxed out the rents to you leaving you with no monthly cash flow..in lease purchase,yu try to sell today at tomorrows prices(appreciation)..will there still be equity in your deal after you finish your lease, on both sides, and enter into your option?? sandwich leases can be complicated if not fully prepared..i would walk from this..there are many other deals out there to get sandwiched in with security..i certainly dont mean to discourage by any means, its just my opinion of course..pm me with details or e-mail through profile and maybe i can help further and we can post results..
regards-pat
My interest in doing a lease option to begin with was just to obtain the property. My long term goal was to continue the lease option. I guess just using the least option as a vehicle to tie up the house with the intentions of purchasing the property as I have very little money to invest. If I were to move forward with this, is there a percentage over the mortgage payment that I should use a a guide to charge the future tenant. I just want to know this for my own information.
I may pass on the property as they are currently trying to evict the current homeowner and I have no idea if there will be any damage, etc to the property.
Quote:
On 2004-01-14 01:34, patricc68 wrote:
to know your rent market is paramount..if you buy on a lease/purchase then turn around and lease/purchase out is a sandwich lease, and can be done, just make sure you can sub-lease purchase out on your original lease.. however, dealing with professional investors you may run into a problem getting more rent from your end T/B, as the investors have probably maxed out the rents to you leaving you with no monthly cash flow..in lease purchase,yu try to sell today at tomorrows prices(appreciation)..will there still be equity in your deal after you finish your lease, on both sides, and enter into your option?? sandwich leases can be complicated if not fully prepared..i would walk from this..there are many other deals out there to get sandwiched in with security..i certainly dont mean to discourage by any means, its just my opinion of course..pm me with details or e-mail through profile and maybe i can help further and we can post results..
regards-pat
Regarding your question about % above your payment to charge your tenant / buyer. Again, know what the market will allow you to charge. Since you will probably dealing with a tenant / buyer who currently can't go to the bank but wants to begin building equity and share in the benefits of home ownership you may be able to easily charge $50 to $100 more than the market rate.
Also make sure, your contract is assignable and you can sub-lease the property. Without those two, you would have to buy the property before selling or sub-leasing.
See if you can borrow or buy Wendy Patton's material on sandwich options. I also think that Ron LeGrand has some material. None of these gurus are perfect, but it gives you a ton of material in a short amount of time. Do some reading/listening and get some sandwich specific lease that are very buyer friendly when you are the buyer, and very seller friendly when you are the seller.
Wendy only buys from individuals, not investors. Unless you are savy, it is more likely that an investor will have the one up on you.
Brenda
DUH!! dont i feel stupid
i knew that too, i just didnt associate the leasing from the original party as "leasing" hehehe
i feel like an idiot but nvm me. i wear LUGZ to keep me on the ground so i dont go floating up like an airhead...
duooooo POP!
[addsig]
You would need to post some more number based information. How they can lease option to you? Through assignment of contract.
Quote:
On 2004-01-14 15:47, ahabion wrote:
DUH!! dont i feel stupid
i knew that too, i just didnt associate the leasing from the original party as "leasing" hehehe
i feel like an idiot but nvm me. i wear LUGZ to keep me on the ground so i dont go floating up like an airhead...
duooooo POP!
That was funny ahabion! I sympathize. Sometimes it clicks and sometimes it doesn't. I do okay though...I can always pass it off as being blonde. <IMG SRC="images/forum/smilies/icon_cool.gif">
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It's Not What You're Getting.......It's What You're Becoming![ Edited by Steena on Date 01/15/2004 ]
Well, I e-mailed the contact on the website where I got the lead from and was advised that they no longer do lease options. Interesting. I will have to see what other options I may have.
I have another question. I think though that I will create another post.