OfflineI would like for some advice.
I have been thinking long and hard and studying the market and what is going on with wholesaling. It seems today that everyone is looking for 50% below market value. What is Market value anyway everything is going down, down, down.
What if we were able to service people who do not qualify for traditional financing or do not have cash to purchase these deep discounted properties? I have decided to build a buyers list of people who are looking to lease with the option to buy properties, or rent to own their own home, instead of just renting. Then I am going out every day and making offers on properties that fit my buyer’s criteria.
Just for example I have a buyer that is willing to put $7,000 down, Pay $1,700 a month and are looking for something in the $250,000 range. So my strategy is to go in and make an offer to lease purchase the house from the seller. I will only put down $5,000 which will come from my buyer, I will pay $1,500 a month and lock it up for the option to buy at $240,000. How will I get paid on this deal? I will get the spread between the $7,000 down from my buyer and I will only pay the seller $5,000 then I will also get the spread from the $1,700 from my buyer and the $1,500 that I have to pay to the seller each month, and at the end in 12 months when the buyer executes the option to buy for $250,000 the seller will get paid their $240,000 and I will be paid $10,000.
Add this entire amount up and it comes out to $14,400 net. All of this was with no money down.
Please tell me what you all think of this
Has anyone been successful with Sandwich leases?
The sandwich lease can be a great way to control the property and generate some cash flow. I used to deal with an investor who did just what you proposed. He cautioned to be sure to screen the tenants. Make sure they will be able and willing to make the monthly lease payments to you and that they have the ability to get regular financing at the end of the option period so they can buy the property. Also be sure to have the tenant option expire about a month before your option with the seller. That gives you some time to find another buyer if the tenant doesn't want to exercise their option to purchase.
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Now that is thinking outside the box.So when the tenant can not be found,you never used your credit.When you have nothing you cannot lose nothing.Only gain pure experience.
Yeah, I Definitley Agree with bconnor on Pre-Screening your Tenants, You NEED to make sure that your Tenant/Buyer will be able to Aquire Traditional Mortgage Financing at or Near the End of the Option. I would Strongly Suggest putting each and every one of your Tenant/Buyers through a Credit Program that Rebuilds their Credit over a Short period of time, Also make sure that the "Spread" Between your Buying price and your Selling price is more than $10,000. Generally I try to keep at least a $15,000 Spread, One more thing, Make sure your Tenants know that they are Responsible for any Maintenance on the property....say over $250-$500 bucks, Personally I would Purchase a Home Warranty that I would make the Tenant/Buyer pay for(in their Lease payment) that way if ANYTHING goes wrong your NOT Throwing money around for Repairs, Just Disclose Everything UPFRONT so they know what to Expect, I ONLY will deal with Tenant/Buyers that INTEND on BUYING the Property, NOT just someone looking to RENT, CLASS DISMISSED......SULLY
YOUR HERO, SULLY
What risk do you run if the property owner files for bankruptcy during the option period?
Anyone know the answer??
Check out my journal at: http://www.deangraziosi.com/real-estate-forums/investing-journals/29155/...
You would set up an escrow account & put the money for the owner into that account and they would be paid from that account. This way you don't have to worry about them not paying the mortgage.
Lea
SPR Property Solutions, LLC
If you lease option a property with a owner/seller that has a contract of mortgage with a lender,Your secondary LO contract with the owner/seller would seem to be over-ridden by the primary lien holder and the LO contract can be considered a just reason to default the loan on the property.
Please anybody reading this do not take it for fact,It is only a statement/question.If someone would comment on this statement;Thanks!
Invest in yourself!
Sorry - not sure it it is clear. The money from the escrow account would go to the owners mortgage company from the escrow account.
Lea
SPR Property Solutions, LLC