Endevor 2 - The Sandwich Lease Option and the lessons I learned.

After my experience with wholesaling in Memphis, TN I had had about enough and stopped doing real estate for a few months. I thought I would try a few things locally. A condo came to me in September of 2009 where the owner's had very little equity. I managed to negotiate at deal where I would purchase the condo for $276K by paying them $2,400/month. To seal the deal I sent them $100 for the option and another $100 for a damage deposit (remember I am leasing the property.) With this one I was at least smart enough to get a 90 day period to get a Tenant Buyer in. I also found out that some banks will not lend on a property unless it had at least 6 months of title seasoning. Though there are banks that don't care this eliminated 80-90% of the banks my Tenant Buyers could go to for a loan. With their credit already questionable this does not bode well for them getting approved for a loan. But I pressed on!

My plan for the tenant buyer was to give them an option at $280K which was right around fair market value and charge them $2600/month for rent. However Fair Market Rent at the time was right around $1600/month so charging even $2400/month was a bit much. But tat was not all there were some other issues. 

• The owners were absentee owners and they had a relative of theirs who was showing the property. 
• The unit was occupied by a couple with 2 children. This family was "eccentric" and refused to allow anyone into the property unless the husband was there. Unfortunately the husband worked some strange hours and was only home 3 days/week after 7:00PM. 

So the way it would work is as follows.

I get a call from an interested Tenant Buyer. I tell the tenant buyer I need to consult with the current tenant to schedule an appropriate time. I call the relative of the owner who then calls the Tenant and asks them what would be a good time to do this. With the relative working a full time job it would sometimes be as much as a day before I heard from them. 

Though I got several bites on the property I was never able to schedule even one showing. I got to 30 days left when I contacted the owners and told them I wouldn't be able to do it. Needless to say they were pretty angry. On this one I lost my deposits and I needed to use just about all of my people skills keep the couple from suing me. Just like my first endeavor 1 day after I cancelled the agreement I had a really strong candidate for a tenant buyer.

Lessons Learned:

1. 1..If you are going to do a lease option keep the rent no greater than $200 above fair market rent.
2. 2..Make sure you have a key and the contact number of the tenant directly if the unit is occupied.