Alex, I know where you learned these as I do these to. This is a moral issue now. Here’s a senario. Six months down the road the buyer finds out they are going to lose their home due to the sellers are going into foreclosure, after they have been paying religiously and the sellers where just pocketing the money. Now another senario. The sellers sold the property out from under the tenant/buyers, now they are getting evicted. Its OK though you have your butt covered, and just think of the good things people are going to say about you and Lease Options in general. Don’t get me wrong here this is a good way to make some cash, I just think you should take it further. Herbster
I guess the same could be said about the sandwich lease option. I see nothing wrong with me finding a qualified tenant to fill a home; what the seller does or does not do is on his conscience. Tenants are told about any posibility that could arise.
Alex, Tenants are told what the possibilitys are. Thats great. I’ll assume you mention the memorandun of option, and maybe enlisting a 3rd party loan servicing company. thanks,Herbster
Correct, I instruct them on how to protect themselves the best way I can.
arent the buyers pissed that their option money is just thrown away and not used as a down payment 4 the house that they r buying
what do they use as a down payment once they give it 2 u— people arent so glad to give away option money that is not used as down payment — option money is only not supposed to be used for down payment if they dont fufill the contract
or do u not tell them that?
The option money is applied towards the purchase price…If somone buys a house for 100k and puts down 3k in option money, when they’re ready to purchase they come to the table w/97k…
Curiositygirl,
Where did you get that idea? Of course the Option Consideration counts toward the down payment. Some lenders will even consider the rent credit as well. I believe FHA and Fannie/Freddie will consider that amount if its over fair market rent(FMR). I could be wrong on that so just ask the lender.Some do some don’t. Herbster
but is the original owner willing to let you just take the option money away to go into your pocket ----- the buyer is still gonna want that credited towards that down payment ---- now the original owner has to reduce the purchase amount without getting the option money for it
Yes, that is the trade off for me finding a tenant…I don’t work for free :biggrin
You can’t have your cake and eat it too.
Well then sounds great
U never considered renting it out till market comes up and then making some money?
…no, I do not own the house, so I could not do that. And I wouldn’t do a sandwich lease option, not ready to assume that kind of risk…too many things can go wrong and you will end up spending a lot more money on legal fees then you will ever make. There are plenty of seasoned investors that do hundreds of them, but they are just that: seasoned.
With this, I’m in and out real fast. I make 3, 4, 5k and assign my interest and I’m done.
Curiositygirl, One thing needs to said here and thats that these are usually very motivated sellers, they are willing to give up the option consideration for getting their house sold and for our services. The services aren’t just the forms. There are marketing, credit checks and background, setting up a 3rd party LSC, showing, negot’s etc.
Sometimes we pad the price a little so the seller gets full price and sometimes we split the Opt. Cons. for out of area customers. Herbster
Alex
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Well I guess I see it like this if the seller leases it to you at 150,000 and you charge someone a three thousand option fee to sandwich then you can just make the purchase price to them 153,000 and the seller is never out in money because they still have the originial offer of 150,000 you are the one who made the money by upping the sandwich price ----- is this a good way to do it or jusst reeducde the original price?
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Also Alex how do you negotiate with the seller to let you put down a low option price so you can sandwich it to someone else, because really if you tell then what you are doing couldnt they say screw you i can do it myself without letting you have equitable title for a little while. Also I can keep option money myself — how do you not give up your secret while closing the account
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Do you tell them you are only finding someone else for them to lease their house or do you just act like you are going to lease it and then assign
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Also I have learned that when you do a lease you are supposed to have an inspection done on the prperty etc — do you have all this done to show to the person that you are going to sandwich it 2?
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Also what if they say well I want to be able to see mortgage statements etc and liens to know what I am getting into ---- do you have all that info and do you set it up where they can make mortgage payments — cuz sometime people wont sign and give up money unless some of this is available to them
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how do you convince seller to let you wait 2 to 3 months before starting your option dont they lose money while your looking because they have to pay mortgage themselves ---- .
6.what if they find someone else before you can deliever and your two months option time hasnt started.
That’s a lot of questions!
All I can tell you is to go google a guy named Michael Carbonare; his website (naked investor) will be the first result.
This is where I learned how to do the co-op assignment.
I DO NOT suggest doing a sandwich lease option!!! Especially with limited knowledge of REI.
can you answer thm please i want to see what you do
You really need to invest $97 and buy the manual.
You need to get contracts, step-by-step instructions, and other things. Almost everyone in here has spent at least a little bit of money on educating themselves…
o i take it your still learning also
You’re always learning in this business.
Like Alex said, go ahead and get Michael’s manual or some other L/O course, for less than $100 you can’t go wrong. Having said that…
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Add it so that your price with the seller includes your assignment fee. And also make sure you don’t confuse sandwiching with assigning.
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When a seller asks for money I simply refuse. And yes, do this business long enough and you will get screwed by someone, guaranteed. But that’s definitely the exception not the rule.
3a. Tell them. People appreciate help, they don’t appreciate being lied to.
3b. Inspections are optional. I’ve never done one or had a T/B ask to do one.
- Never happens. With CAs the T/B always pays the seller direct just like with any other rental.
5 & 6. All of my Options are non-exclusive so the seller can continue doing what they’re doing (FSBO or Realtor) while I’m doing my thing. Whoever signs a tenant/buyer first, wins.
doug
have you made good money in assignment fees
is it hard to get these deals to follow through