Life is full of options, right? Like anything else we want to do, it's sometimes hard to get a strong start, because there really are just so many directions we can choose to go in. Investing in real estate using options and creative seller financing is a great way to get started investing in real estate, especially if you don't have the time or money to start buying properties outright.
Personally, I believe that, if you're currently considering your options for investing in real estate, then lease options are likely the best place to start. As the name implies though, you have several "options" to choose from. (I promise I'll use a few synonyms for "option's') To make things simple I want to by sharing with you a little about a Sandwich Lease, which is a useful investing technique, that allows new investors to try their hand at investing, without risking much of their own capital or time.
A sandwich lease option finds you, the investor, in the middle of the deal; which as you will find out can be a profitable place to be. I'm going to assume that you've heard of "rent to own" - where the owner of a home agrees to sell their home to the renter (or investor), sometimes with a portion of the rent building equity, based upon agreed upon terms; which are covered in the rent to own, or, "lease option" contract. This is where the investor, YOU, comes in.
You find a seller, I use craigslist, willing to do a rent to own, you can then option the property (take control of it), and from there you have a few profitable options; one is subletting the property at a profit. Of course there's more that goes into this, and a multitude of options you can use; but, hopefully, you can see just how powerful this strategy can be for starting your own business! Below is an example that should give you an even clearer idea of how a sandwich lease works! Read more below about how options in real estate can work for you!
A Sandwich Lease Option Success Story: Real World Example
This study is important because it describes a first deal. I like it because it highlights how each party to the transaction was able to come away as a winner. Here is how Steve described it. Sara had a house in Fowlerville that she kept after her divorce. She couldn’t stand to continue living with the memories from the marriage, so she bought another house in Fenton, closer to where she works. She had the house “For Sale by Owner” and “For Rent”. She wasn’t excited about being a landlord, but she was looking for debt relief in a quick way. I called on her “For Rent” ad and we met to discuss some options. I agreed to start paying her $1,100 per month immediately (because that is what she needed to cover her expenses) and for $1,000 I bought an option to buy at $155,000 sometime within the next three years. I put about $300 into the house to fix a few things, plus a home inspection and title search, so my costs were minimal; around $500.
Two days after I signed with the Sara (the owner), a tenant/buyer from my accumulated list paid me an option fee of $5,000 and the first month’s rent of $1,195 to move in. The lease term was 18 months and the buy-out was $169,900. There is no lease money being applied to the purchase price. The lease started several months ago and they have been paying every single month early. They have never called me with an issue of any kind, so it is going about as smoothly as I could ever hope.
I liked this deal because the owner was very happy that I took the house off of her hands, and she always receives rent from me by the first of the month. The tenant/buyers were very happy because they were able to get themselves and their 3 children from an apartment into a nice house on an acre of land. This is a “win” for me also because I made money on the front end with the option fee of $5,000 plus $95.00 monthly cash flow, and the whole deal will make over $16,000. Not bad for my first deal! S. Giroux - Michigan
For more information on lease options and my real estate investing strategies visit my NuWire Lease Option Expert Page.