High Equity Lead Options

7 Replies

Hello BP I am in contact with a potential seller that has under 20% Equity in her property. I have not seen the property yet. But from our conversation it seems like the only thing it needs is new flooring and touch up the paint. The numbers ARV $256,000 MORTGAGE $204,000 PAYMENTS $1500 PROJECTED RENT $1700 How would I go about offering a lease option with no money down. Also her and her family live in the property. Would this be able to work as a wholesale deal because it doesn't need a lot of work? This seems like a pretty good property for a sandwich lease option. But I am not sure how to go about doing it.

If you're new at this, I wouldn't recommend a sandwich lease. That, plus the fact that it needs work make this property better suited for a lease option assignment, a cooperative assignment, specifically.  You make your money upfront from the assignment fee.  Then you move on to your next deal.  No cash required, no risk, no repairs.

This property isn't good for a SLO.  In order for it to work, there must be a spread between what you pay the owner/landlord, and what you can collect from the buyer/tenant...and there wouldn't be any.  I'm estimating this would be a negative on your side.

The Numbers:

Mortgage Owner pays is $1500/month.  Owner isn't going to lease the property to you for $1500...they still wan to make money.  The rent you'll pay will more likely be around $1750.  If the projected rent to your tenant will be $1700, you're already in the negative...without increasing the rent for your profit.

If there is only a spread of $56k between what the ARV is and what the seller owes, and there is still ANY rehab needed, the Seller isn't going to do any rehab for you...and you should NEVER pay for ANY rehab if you're the Option Buyer.

The best (and only I will do) properties to do using a SLO, are ones where the Seller has 100% equity, and NO rehab needed.

A cooperative assignment is a lease option whereby you first reach an agreement with the homeowner, and then you assign the deal to a tenant/buyer.  The t/b pays you an assignment fee.  That's your payday in the deal.  You're out of the picture and on to, hopefully, bigger and better deals.  In essence, you're making money because you know to put the deal together and you have the correct agreements to do so.

Originally posted by @Alberta Eleazer :
@Joe Villeneuve how would you arrange a the numbers. How much do you think I can make? How much do you think I can offer the interest in the property to another investor?


Q:  how would you arrange a the numbers.
A:  What numbers do you think are "arrangeable"?

Q:  How much do you think I can make?
A:  $0...like I said in my first post.

Q:  How much do you think I can offer the interest in the property to another investor?
A: No idea, but if the ARV is what you stated, you have to work your way backwards from there.

I don't see this being a property that can work for doing a SLO...for the reasons I stated in my first post above.  

The numbers don't lie...so don't argue with them, you'll lose every time.

Originally posted by @Alberta Eleazer :
Hello BP I am in contact with a potential seller that has under 20% Equity in her property. I have not seen the property yet. But from our conversation it seems like the only thing it needs is new flooring and touch up the paint. The numbers ARV $256,000 MORTGAGE $204,000 PAYMENTS $1500 PROJECTED RENT $1700 How would I go about offering a lease option with no money down. Also her and her family live in the property. Would this be able to work as a wholesale deal because it doesn't need a lot of work? This seems like a pretty good property for a sandwich lease option. But I am not sure how to go about doing it.

The way I may make a property like this a win-win-win would be to match this seller up with a retail owner-occ buyer.   We have all talked to people looking to buy their first home. Especially younger people starting out or having more kids and looking to move up.  Build a list.

I always ask someone seeking a house what their criteria are.  With this specific house I would have 3 people off the top of my head.  My wholesale fee is generally about 20% of the equity capture.