Lease Options (Realtors)

6 Replies

I have two questions for lease options

1. How do you pay the seller, if their working with a realtor? I know you can structure the deal to pay the realtor their commission up front but how do you pay the seller to lock in the deal. If the seller wants something? 

2.If your doing a sandwich lease option. Can you make the realtor find a tenant buyer or do you suggest finding a leasing agent to do this for you? How would you compensate all parties. Seller, Realtor, Leasing Agent. If you go this route 

Originally posted by @John Calixte :

1. How do you pay the seller, if their working with a realtor?

2.If your doing a sandwich lease option. Can you make the realtor find a tenant buyer or do you suggest finding a leasing agent to do this for you?  

 I've done a dozen directly with the seller, never with an agent involved.  They will need their full commission (as written in their listing agreement) plus whatever the seller agrees to accept as option consideration.   Spendy. Plus the agent will look at you sideways because they don't know how to do them.  

No, you can't make anybody do anything.   You could I suppose pay an agent to find a lessee for you, but expensive and out of their wheelhouse dealing with options.  

My last tenant buyer was an agent and needed a full education on how Options worked.  Expect no different. 

I see. Thank you for that explanation. I guess you can pay the realtor their commission upfront and negotiate with the seller on their part of the deal.  So how would you market the property without it being considered brokering without a license? If your not going to use a realtor to find a tenant buyer? 

Originally posted by @John Calixte :

I see. Thank you for that explanation. I guess you can pay the realtor their commission upfront and negotiate with the seller on their part of the deal.  So how would you market the property without it being considered brokering without a license? If your not going to use a realtor to find a tenant buyer? 

You would just be sub-leasing and sub-optioning plus you will have an equitable interest in the property with your Option.  No problem. 

John, what Steve said pretty much nails it.  But let me add my two cents and ask a question or two.
For starters, much of what we do when working a lease option deal depends upon the type of lease option and my position in the deal.  A sandwich lease is quite a different strategy than a lease option assignment, for example. 
As for how you pay the seller, the short answer is "very sparingly". If I'm working a lease option assignment my out of pocket cash to the homeowner is $5.  If it's a sandwich lease, negotiating skills come into play.  Ideally, I'm able to control the deal for an amount equal to about one month's rent.  May be more, may be less.  Every deal and homeowner are unique.  But whatever agreement we reach on the amount of option money, it doesn't come out of my pocket.  I negotiate a higher amount from my tenant/buyer and then pay the homeowner what we agreed.
I'm not a licensed agent, nor am I anti-agent.  But in close to 30 years of investing, primarily using different types of lease options, I can count on one hand the number of times a Realtor has been involved in the deal in any capacity.  As Steve said, most are unfamiliar with lease options or, worse, see them as an evil scam.  The bulk of your business will come from dealing direct with homeowners.

Hi @John Calixte .  My thoughts based on what we do in our family business...

1. We don't buy properties that are listed with a Realtor.  It just wastes so much time and then you have a 3rd party who you have to educate.  We prefer to wait until they expire and then talk with the seller.  So much easier that way...

2. We don't pay a Realtor to help us find our tenant/buyer.  We do it ourselves.  Saves time and money that way.  No Realtor or leasing agent means more profit for you. 

Hope that helps and if any of this strikes a cord with you shoot me a private message and I can give you a few free things to check out.

Chris Pre