Partnering w/ Realtors - Lease option investing

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Partnering w/ Realtors - Lease option investing

Christopher Dorsey
Bossier City, LA · Member since 2015 · 18 posts · 4 votes

Is it possible to invest in lease options / sublease (sandwich) while using a seller's agent to send you property? This is my thinking....

It is a win for the agent because they wont lose the sale and (eventually) they will get the entire 6% commission. (3% from investor upfront and 3% from the seller at closing)

Where the money is made: Once I get a tenant-buyer in the property I get my commission money back from their option deposit, I have a $300-500 spread on the monthly rent, and I sale the property for $15-20k more than what I purchased it for. Essentially, not spending any of my own money to take control of the property. 

If the tenant-buyer doesn't buy the property after one year, I could just exercise my option and own the property myself. 

Is this possibly, or am I out of my mind to think this could work?

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  • Derek Dombeck
    Real Estate Consultant · Wittenberg, WI · Member since 2014 · 572 posts · 572 votes
    7y

    Anything can work with the right people involved. The challenge will be finding an agent that can do this. You see, an agent is an extension of their broker. So, even if the selling agent likes your idea, they can't do this if their broker doesn't agree to it. That will be an uphill battle.

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  • Shane Short
    Real Estate Agent · Portland, OR · Member since 2015 · 70 posts · 24 votes
    7y

    I like this idea a lot. We have a lot of options like that here at my agency, however, like @Derek Dombeck said, it's all about the agent and their broker. I would look for a newer agent that is hungry, they'll be more willing to take on exciting new journeys and willing to accept big new learning curves/ challenges like these, unlike a long time agent that has work come to him a lot easier might not want to bother with the challenge and extra work. 

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  • Don KonipolBusiness Member
    Investor · The Woodlands TX / Avon, CT · Member since 2009 · 6k+ posts · 10k+ votes
    7y

    @Christopher Dorsey

    A broker representing the seller is acting in a fiduciary capacity. He or she will be obligated to inform the seller of all the negatives of accepting a deal like yours. Brokers, who deal with owner occupied residential properties, are also very sensitive to seller complaints of brokers not performing fiduciary responsibilities.

    That being said, your proposed offer is a legitimate offer, and deserves to be presented to the seller for his consideration. However, under the rules of the National Association of Realtors, as well as the rules in many states, when a BROKER represents both buyer and seller, he is acting as an intermediary, and has to have the express written permission of both parties. Since for a seller this is giving up a lot of protection for little or no benefit, I personally would never agree to this situation. Further, even if both parties agree, the broker is required to appoint a separate agent to each party, so that while the brokerage receives both sides of the commission, the agents share is split two ways. The bottom line is that there is no financial benefit to the referring agent above what they would earn should you utilize a buy side broker. This puts you on the same playing field with everyone e.se and his brother trying to create sandwich lease options, and unfortunately negates your strategies perceived advantages.

    However, I really like your thinking, and encourage you to continue to come up with ideas that will possibly create a clear strategic advantage in deal flow. I think you will ultimately be successful. Good luck

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  • Shiloh LundahlPro Member
    Rental Property Investor · Gilbert, AZ · Member since 2016 · 3k+ posts · 4k+ votes
    7y

    @Christopher Dorsey this strategy can be done acquiring a property “subject to” the existing financing and then doing a lease option with it. We have done 4 of these in the last year or two. It is a great way to acquire a property without much of your own money and without bank qualifying. 

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