Lease Option a Lease Option...Sandwich?

[Brandon Sturgill]

I've personally never executed a sandwich lease option...thanks in advance for the input.

The story:

• Motivated landlord
• Asking $65k
• ARV $80k
• Renovation ? assume $0 to hold...property is in good condition
• 10-yr tenants @$770/mo. (tenants keep maintenance and pay all utilities)
• 1st & 2nd Liens ($650/mo. combined note payment...PITI)

Acquisition

• Lease Option (48 months)
• $60,000 option purchase price
• $3,000 Down (5%)
• $650/mo. PITI paid through third party debt servicer.
• $120/mo. to operating expenses/reserves- (not interested in cash flow- don't need it)

The play:

The current owner has indicated tenants want to purchase the property but have bad credit...but, they have $25k cash on hand...

Can I execute a lease option with the existing tenants while holding equitable title?

• Collect a $10,000 option fee (36 month option)
• $70,000 option price
• Monthly rent increase to $800/mo....contribute $30/mo. to purchase price to justify the rent increase.

Everything else remains constant

• $6,500 cash on the front end
• $10,000 on the back end if they exercise the option...if not, plan B...

Thoughts?