Lease to own sandwich with current owner

10 Replies

I have a question about how to best help a homeowner and maximize my profits as well. he has to pay 13000 as back payments. He owes 204000 on the house and he would be open to paying me rent with an option. I don't know how that would work considering he would remain the owner. 

I am very new to lease options so any advice would be appreciated. 

He will be bringing me all appropriate papers tomorrow so I will have all precise numbers. 

William there are two ways you can help this seller using leases and options

You have to ask yourself whether not the property is going to appreciate overtime

If you feel it's not going to appreciate, you need to get a price below the market today on your option with the seller,  if you going to do a sandwich lease option and stay in the middle

If you going to do a lease option assignment where you lease with an option from the seller and assign thevdeal to a buyer for fee, it  doesn't matter what the price is as long as the price is today's value or less

When I talk to sellers I don't talk about lease is an option, I first go through three columns landscape in a yellow legal pad,  and show them the basics of the choices: 1) sell with an agent and pay the customary costs include sellers concessions, agents commissions, closing costs, vacant house holding costs, etc.

The first column it's important to go through an example of their house value; what ever  the fair market value is, do that exercise so that the seller truly understands he's going to net a lot less money selling agent than ur solution

2) Second solution entails leasing out with the property manager, and you go through the cost to lease it out and also the cost to repair and sometimes property managers tack on other costs like padding maintenance costs

Then I talk about the risks involved with leasing it to an unproven tenant, and then having to evict the tenant, lost rent for 6 to 8 weeks, clean the house, remarket and screen the new tenant, etc.

Before I go through my solution, I say a "what if statement" that is something like this:

Before I say the "what if statement" it's important you understand that I am using "negative phrasing" here, and ""appeal to a higher authority" which works a lot in terms deals like lease options, sub 2, and wrap purchases

Here goes..

"Bill and Susan we gone through a lot of numbers here and I know that this is a little confusing but I want to throw out one of my solutions

and if you don't like the solution just let me know and we will move on, but here goes… 

What if I could somehow, and I have to talk it over with my business partner, but what if I can get a payment to you for a period of time, This payment would be pretty close to your PITI, and I would make a commitment to paying this for 24 to 36 months.

At the end of this. Then I would,  whatever your mortgage balances is, pay that off in full and you would have this property sold completely.

I am in the lease to own consulting business where I have buyers right now thatb will enter into a lease, for 24 to 36 months, and then whatever your balance on your mortgage is will pay that off completely.

Before I go any further I was that solution sound to you?

Medium banner reiskills 997   copyBrian Gibbons, REISkills | [email protected] | 818‑400‑3046 | http://MyREISkills.com

@William Johnson   @Brian Gibbons  has solid points. (as usual)

My initial take away from this is he owes $13k in back payments?  If  you get involved that has to be taken care of ASAP or you lose your position, the house, everything on this deal. 

So how will you do that?

Not with you own money...with the buyers...(Sidenote...if this were an executive 5MM home then paying $13k might be worth it..but this is not...)

Can you get $13k down on it?

Would it cash flow enough?

I take it the owner wants to stay there, you get it caught up then he LO's it from you?

Sounds complicated...but it's worse than that...it sucks...

The owner has already proven he can't make the payments...why would you as the investor want to lease purchase to someone that has essentially told you..I can't make the payments...

Maybe I misunderstood your post. 

I guess what I'm saying is we need the nitty gritty stuff to best access it.

@John Jackson

 @Brian Gibbons

Thanks for the advice I will post the nitty gritty tomorrow but essentially iif they're is any way I can help them stay in the house while making money that is the best case scenario. They had bad luck and now it seems as though that is behind them. I get all info tomorrow afternoon and I will post it then. 

@William Johnson

Sale Lease Backs, meaning buying from distressed sellers and keeping them in the property with a lease option, I would stay away from.

If a seller needs cash to cure a note or back taxes, he should sell to you and move out, and you find a cash buyer or tenant buyer and make a profit.

As REIs, we put sellers and buyers-tenant buyers together.  Not lend money to troubled sellers.

@John Jackson would agree, 

the road to Hell is paved with Good Intentions.

Medium banner reiskills 997   copyBrian Gibbons, REISkills | [email protected] | 818‑400‑3046 | http://MyREISkills.com

@Brian Gibbons

Solid advice! Thank you very much!

@William Johnson  I triple what @brian 

@Brian Gibbons undefined  said...

If they want to stay in the house, then you take it sub-2, get title and do a wrap...

But only after you've confirmed their current financial situation with bank statements and trip-merge

Even then...refer to rule 1...what Brian said...

IF you do a wrap on it and they file BK..you could be hosed for a loooong time...

I'd tell them the only way you can take it (assuming it makes sense)  take it over sub-2, they go get a trailer to live in and you do a wrap or LO to another buyer. 

Not lend money to troubled sellers....

Golden...

Originally posted by @Brian Gibbons :

@John Jackson we should do a video

How REI Newbies Need To Stay Out Of Trouble With Home Sellers

 That is a great idea! I don't know if the sub 2 and a wrap (which I have no idea what it is) would be the best idea because I have not figured out how to accomplish either one in my legal jurisdiction yet as preparatory planning and the time frame is extremely tight. My gut tells me to back away from this one.