using Lease Option to buy rental

General Real Estate Investing
1

this was post on the Rehabbing forum could someone give a example of this type of lease option

being experienced with property managing you may want to try a “lease option” deal. An option gives you control over a property without actually owning it. From there you can rent it out and exercise your option to purchase down the road with a conventional mortgage which will be easier assuming that the property value increases. Banks treat it as a refi. Looking at the process one step at a time it really isn’t that tough.

Could you give a example of how deal like this works. How can you get good cash flow on a deal like this. Do you let the owner know up front that you will be renting the house out.

2

Terry, lease options can take a variety of shapes. What you described is commonly referred to as a sandwich lease. This is where you lease with an option a property from a homeowner with set terms for length of lease, option consideration, monthly payment, and a purchase price. That’s half the deal.
Next you find your tenant/buyer, and reach an agreement on terms with them. Those terms, however, are different than your terms with the seller, obviously. You will receive more option money, more each month, and set a higher purchase price. So you have monthly cash flow as well as back end profit, assuming the option to purchase is exercised.