Meatless Sandwich Lease Option

General Real Estate Investing
1

I have an investor buddy, who is trying to work a deal involving a lease option. Basically, the situation is that he signed a straight option with a seller on a pretty house at $410K in hopes of being able to find a retail buyer. The seller has gotten a little antsy and now wants to lease option to a tenant-buyer (the investor doesn’t want to do a sandwich lease option). The seller only wants the tenant-buyer to give him first and last month’s rent and a deposit; whatever the investor can make on top of that is his to keep.

So, the investor has advertised the property at $419,950, which is about $20K below current market value; this appears to be a good deal for the TB if market values don’t drop in a year. The investor is trying to figure out how to structure it so that he makes money on this deal upfront or on the back end. All I could think of is to assign the deal to the TB for $9,950 and the investor is out of the picture with some upfront money. Does this solution present any issues for the TB when he goes to refinance the property with conventional money in a year at $410K? Is there a better way to structure this?

Thanks,

Ben

2

Change the price with the seller to $419,950, assign the contract to the T/B for $9,950, and have both buyer and seller sign the assignment agreement stating that the $9,950 assignment fee will be applied to the purchase price.

That way the lender is more likely to view the $9,950 as a down payment when it comes time to refi.

This is a classic Cooperative Assignment set up.

3

Thanks Doug. I’ve heard of cooperative assignments, but I never knew how they worked. I’ll have to read up more on them, since they sound like a good way to make some quick cash in today’s market.

Ben