Are Sandwich Lease Options in 2014 Even Realistic?
So I've been reading up on L/O (lease-options) and I was getting pretty revved up because they sounded like a great way to purchase a home and cash flow with out having to pay so much money upfront.
However when talking to a mortgage lender today who about credit repair he in a very supportive way that what I was venturing to do posed many challenges.
1. He said that essentially I'm looking for a unicorn tenant-buyer
I told him that I'm looking for tenants that have just had one bad event that was out of their control happen and now they're credit is ruined and they're looking for a way to repair it and move on with their lives. He said that essentially I'm looking for the best of the worst candidates because a lot of people have bad credit because they're bad with money not because of one unfortunate circumstance.
2. He said that many people with credit scores of around 697 frequently get denied mortgages. Even though for FHA loan financing all you need is a 640.
He says that he sees that all the time. He said that a lot of what lenders are looking for is cash reserves and that most tenant-buyers don't have that. So even if they do have a good credit score the fact that they don't have money saved is why they're get denied financing.
This man was really nice and wished me the best. But he was very skeptical and I think he posed some valid points. I just wanted to post some of the things we talked about and see what you who do L/O have to say about that.
How do you think L/O fair in today's market? How are L/O working for you now vs any other time? How do you overcome these 2 obstacles, if you do overcome them? Do you you pull in tenant-buyers who already have good credit? If so for what reasons? This seems to right now be my biggest hang-up about sandwich L/Os.
Does anyone in the Milwaukee market do them? If so I'd really like to pick your brain! lol
I just want to know what the BiggerPockets community thinks about this and how they get around these obstacles because I know these techniques wouldn't be around if people weren't making money off of them. But if they do work how do they work in today's market? Let me know what you think. I can't wait to hear your responses.