Sandwich Lease Option

General Real Estate Investing
1

Hello everyone,

I have read several postings on this site regarding L/O, but I could not find one that really applied to my case, therefore I have decided to just go ahead and ask for suggestions.

I believe I am caught in what is called a “Sandwich Lease Option”. I currently own a home I am trying to sell and I already found the one I want to buy. The seller is willing to enter into a 4-month lease-purchase agreement and I am still not sure if I should go ahead and do something similar with my home. It has been on the market for almost 90 days, 4 showings, no offers. I am working with a relocation company who is supposed to offer a buyout option if the house is not sold within 150 days. I have been told by my co-workers to expect a very low offer, so I am trying to do as much as I can to avoid that.

If I go into a L/O on the home I am trying to sell, does the house price need to be defined immediately? It seems to me that the price will go up because there are lots of new houses being built in the subdivision. I am listing the house for $10K below what I paid last year (brand new home). I only have $5K equity, so I will have to pay $5K to sell it. Am I supposed to enter the L/O contract with the lowest price? I am also thinking of specifiying in the contract that the price will be whatever principal is left since I am not really trying to make a profit out of this.

Any thoughts?

Thanks in advance

2

What you are referring to is not a sandwich lease. That’s when you are an investor in the middle of the lease option deal, between the homeowner and the tenant/buyer. That’s not the case here as you described it. You are simply the homeowner who is willing to lease option his house to a tenant/buyer.
As for the option price, yes, you must set the price at the time the agreements are signed. Don’t expect to be able to price the property for anticipated appreciation. It is highly unlikely in this economy that any tenant/buyer will go for that. Instead, price it fairly based on today’s values, perhaps at the upper end of that range. Keep in mind you are working under a deadline and need to attact attention and interest. That means aggressive terms.

3

Thanks for the feedback. Do you recommend doing the lease portion through property management?

4

Unless you are a totally hands off type, I don’t see why you would need a third party to manage one single family residence. Unless you will be out of the area and have no one to watch over the place for you. If that’s the case, then it makes sense to look at mgmt companies.