Lease Option Question

General Real Estate Investing
1

Sorry this may be a terrible question.

The only way to do a lease-option deal without any money or credit is a sandwich LO correct? The only other alternative would be to buy the house and then lease-option it?

Thanks

2

Hi Alex, actually there are at least 3 other ways to do lease options without any money (or at least very little).

  1. Assignment
    An Assignment is where you sign a deal up on a lease option and then sell your position (as tenant/buyer) to someone else. Typically you can charge a few hundred to a few thousand dollars for the assignment. T/Bs won’t be willing to pay much more than that because the assignment fee doesn’t apply to the purchase price.

  2. Cooperative Assignment
    A Cooperative Assignment is a twist on the above theme. You co-operate with the owner of the property in that they agree to apply the T/Bs assignment fee to the purchase price, in exchange for having a voice in who you assign it to. The advantage to you is that you can normally get more, 3-5% of the purchase price is common. I have an article on my blog that covers the basics of how to do a CA along with one of my personal success stories.

  3. Consultation
    There are any number of reasons why one of the other lease option techniques might not be a good fit. The property could be too far away for you to get directly involved. Or it could be a property you don’t see much potential in. Or the seller may not want you involved and taking a big chunk of the profits but they still need some guidance. That’s where consulting comes in. You can sell your knowledge for a flat fee or an hourly rate.

So there you go, those are a few more ways to make money from lease options. On a side note, if you don’t have any money then you shouldn’t be doing sandwich lease options anyway. You need to have several thousand dollars in reserves in case something goes wrong. Again, that’s where any/all of the above come in. Assignments and consultations allow you to make money without any long-term risk on your part.