Lets say I do a sandwich lease
i get lease for purchase price of 150,000 sandwich for 175,000
monthly 1200 a month sandwich for 1400 a month that extra 200 is my cash flow right? cuz the monthly credits would have already been figured in my original 1200 correct? or because purchase price is now higher i have to give a higher credit?
also i better not do lease for 2 long right or my 25,000 extra will be eatin away in credits right?
Sandwich Leases come with a bigger risk and I don’t advise doing one in a depreciating market. Also some like em some don’t. Instead of getting into a big reply please search them here, its been covered a lot. Then come back. Herbster
curiositygirl, the $200/mo spread in the rent is your’s. Any rent credits that are being paid/received are not a factor in determining your cash flow. Even if the rent credits you were giving your tenant/buyer were 50%, you still receive your full $1,400/mo rent.
in my business model, i don’t give rent credits. instead i allow the tenant/buyer to participate in the tax deductions every year based on an IRS code i give to their CPA or tax attorney. only if they’re paying the full PITI, HOA and our positive cashflow, then the tenant/buyers are entitled this tangible benefit.
You need to be clearer about the terms you are using.
A “lease” and an “option to purchase” are two different things. A lease is a rental agreement. An option to purchase is an agreement between you and the seller to purchase his property for a mutually agreed price sometime before the option expires. As consideration for the right to purchase his property, you give the seller some amount of money.
A lease with option to purchase (generically called a lease option) is a hybrid of the two. You agree to rent the property from the seller who becomes your landlord, until such time as you exercise your option to purchase. The lease option agreement could be one combined contract form or two separate documents.
The amount you pay to the landlord under the lease agreement is rent. Some landlord/sellers will at least want your rent to cover their PITI, some will simply accept market rent even though that may be less than the owner’s PITI.
There is a tendancy in these forums to use “lease option” and “lease purchase” interchangeably, although there is a technical difference. A lease option gives the buyer the right, but not the obligation, to purchase and obligates the owner to sell. A lease purchase goes one step further and obligates the buyer to buy.
There are more details involved, but this covers the basic meanings of the terms you are using in this forum.