hello to all!
i’ve been involved in prequalifying people for secondary (?) mortgages (self employed, no income, foreign nationals, retired, etc) since january '05. recently i decided to get into REI. i ordered a course and received it on march 19th and since then i have been studying religiously. the course provider says i should be able to make between $2k and $10k within 30 days.
because of my poor financial position (divorce, ruined credit, no extra cash) i decided that the best route for me to take is through a “lease option” or “sandwich lease” arrangement but i have questions that i would appreciate some clarification on:
does “option consideration” and “rent credit” only become profit if the “tenant/buyer” FAILS to purchase the property? how do you profit exactly?
an independent agent told me of a property that lists for $554,900 with a mortgage balance of $18k. the owner wants to sell because they have recently built a smaller home and will close on it on april 18th. the agent also says she doubts if it will appraise at the list price. the list date is 11/22/04 and the expiration was 3/22/05. am i right to think that this would be a good property for a “sandwich lease” or “lease option”? should i ask the agent for permission to speak with the homeowner first? and if i can make a deal with the home owner should i offer the agent a percentage?
i’m afraid but willing to jump in the deep end…i have no choice.
thanks in advance!
Hello Almodesto, Welcome to REI Club!!!
Answer Number 1; there is many ways to make a profit in L/O. First is the option money. and yes if the T/B does not take advantage of the L/O, then yes you can make more of a profit finding a new T/B. Second, when you set up the L/O with the T/B you set a price on the house 1-2 years from now. say you tied up the house with the seller for 90,000, with the T/B you set it up for 100,000. say the house was actually worth 100,000 and the appreciation is 5% in your area. at the end of the lease that would be 110,000, minus the option payment they gave you and any rent credit you have set up for them. so say they gave you 3000 for option payments and their rent credits were 100 a month, that would be 104,000. pay off the seller at 90,000 and your left with 14,600 in your pocket. now if the rent you were paying the seller was say 400. and the rent the T/B was paying YOU was say 700. that would be an additional 7200 in your pocket during the lease term.
so what do you got?
3000 up front option money
- 7200 Rent for 2 years after paying the seller
+14600 Whats left after T/B buys the house minus credits etc.
Not bad for tieing up one house worth 100,000 with nothing out of your pocket huh?
Answer number 2; If you want to put the agent in your network. that would be a great way to do it. or you can play the role, you scratch my back, i’ll scratch yours, with the agent. OR if you don’t want to get her in your network, if you have the address to the seller, try going to the house or calling them up to see if they would be interested.
thanks a lot for your answer.