Wholesale Lease Options

11 Replies

Can someone please explain to me what this is? Or point me in the right direction of some articles I can learn what wholesaling lease options is all about? Apparently I have a potential deal that everyone is saying use the lease option route. But I don't know a thing about it. Please help.

A lease option is a combination of renting and buying. You have a regular lease and then you have the option to buy the house during the time of the lease. When people talk about wholesaling the option they mean assigning the lease option to an end buyer. This is typically done on very low equity or no equity deals. If there is a lot of equity you can do a sandwich lease, similar to a Sub2 but without getting the deed. You deal with the tenant/buyer for the duration of the option until they are ready to buy and then you do a double close to get your equity out and the seller is paid off.

Basically you sign a lease option contract with the seller then you assign that contract to a buyer. You charge a fee for this service, say $5k. Sorry, I'm sure you're looking for more detail but that's the basic idea anyway.

Yep, what she said ^

Wholesaling Lease Options or Cooperative Assignments or Lease Option Assignments is all the same thing.

Thin deals, like a house that was bought at the top of the market, say 2006-2007, has little equity.

How can it be listed with an agent? the costs to sell are 10 - 12 percent of equity, with the clean up costs, agents commissions, closing costs, sellers concessions, vacancy holding costs, etc. And thats if you get your price, if you get 95% of comps, you net less.

So, selling on terms, and not paying to get rid of a house may be a good idea.

How does the REI make money?

1. demontstate to the home seller you can save them money with a terms deal.

2. act as a principal in the transaction

3. assign the deal for a fee.

4. use a lawyer

5. dont use rent credits

6. use a RMLO.

Here is an audio presentation to the seller.

http://www.screencast.com/users/REISkills/playlists/Seller%20Presentation&mediaSetId=4bdc2326-f0ad-4a34-88ab-b2560573dea8

Thank you so much everyone! One question remains...how does the BUYER that I am assigning the lease option to profit if he is renting, and then buying the property? Since it's not a rehab, how are they making their money?

The end buyer is usually living there, trying to buy the home. You need to take care that you do not credit any rents toward a purchase price or finance any part of the option price, doing so subjects the deal to Dodd-Frank.

If you're trying to do this with your buyer profiting in the short term, you better buy it really low and sell it low enough to allow them to profit. Don't confuse with simply wholesaling RE, you're selling a contract not the RE. :)

Originally posted by @Brian Stone :
Thank you so much everyone! One question remains...how does the BUYER that I am assigning the lease option to profit if he is renting, and then buying the property? Since it's not a rehab, how are they making their money?

Brian you are thinking like a Wholesaler.

Buyer and Seller in Wholesaling - Cash Buyer and motivated distressed seller.

Buyer and Home Seller in Lease Option Assignments - A Renter trying to buy, cant because of some issue - down payment, credit, DTI see

http://en.wikipedia.org/wiki/Debt-to-income_ratio

Different type of buyer (tenant buyer)

Ditto what @Brian Gibbons said.

The end buyer isn't an investor...he's just trying to buy a house to live in!

The seller makes money and you make money, but the end buyer is just buying a residence.

Can you wholesale a lease option to an investor?  

You can flip the lease option contract to an investor or to a tenant buyer, you can usually make more money flipping it to a tenant buyer

Why would a motivated seller on an absentee list (someone who I presume wants to get rid of a property quick), want to remain a landlord?

@Brian Gibbons

@Brian Gibbons  Why would a motivated seller on an absentee list (someone who I presume wants to get rid of a property quick), want to remain a landlord?

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