I’m sure you are thinking that this is another one of those techniques where you go ask for money from an investor in order to buy a house . Well, that doesn’t apply to this technique . I’m going to show you exactly how to tie up a property with only $10 and earn a residual income over a period of time ending in a substantial amount of income for yourself just for putting the deal together.
You’ve probably have heard of the term “Lease Option To Buy” or “Lease Option”. Well, technique does use the a typical lease option, , but with a twist. it’s know as the “Lease Option Sandwich”. This is where you basically sign a Lease Option agreement with the seller and have the option to “sub-lease” it to another party . Putting yourself in the middle of both parties, hence the name “sandwich”
Today’s real estate market downturn has opened so many doors to creative deals like the lease option sandwich, however, one thing to note is that a lease option sandwich has been around for a very long time now. So it’s nothing new .
Property owners are having trouble renting or selling their properties , so by giving them a creative option, it allows the property owner to relieve themselves from the stress of potentially foreclosing on their property. If you apply this strategy, you are actually helping two parties at the same time. First, you are helping the property owner to unload their property from their portfolio and allowing you to find the renter/buyer. Two, you are helping a family that may not have the ability to purchase a property today because they may not have good credit or enough down payment in order to purchase a home with traditional financing.
So how do you structure a lease option sandwich? Below is an example of how this is done.
Step 1.- You find a property owner that is trying to rent their property . You approach them by asking them if they are open to a lease option to buy . Keep in mind that many of them may say no , Though, you will never know if you don’t ask “Ask and you shall receive” .
Step 2.- Sign a standard lease agreement with an additional option contract . The lease agreement must state that you are allowed to sub-lease the property. You must explain to the seller that you are an investor and that you can put a tenant in the property that is willing to buy within 12 – 36 months. You offer the seller a comfortable purchase price . Consider an increase of 3% increase for each year . For the last 60 years , the increase in the real estate market has been over 5% per year, meaning that you will have the ability to earn the difference of 2% as profits at the end of the contract term.
Here’s a example on how a deal like this would work:
Todays’ value of the property = $100,000.00
Increase 3% every year x 3 years = $109,272.00
Actual project value would be = $115,762.00
Your profit = $115,762.00 - $109,272.00 = $6490.00
Additionally, if the monthly rent per your contract with the owner is $1,000.00 a month, you can rent the property for $1,060.00 a month, which would give you a positive cash flow of $60.00 a month. Multiply this x 36 months, that will give you an additional $2,160.00.
Last but not least, you can ask the renter for a non-refundable deposit/down payment. Normally it is around 1% – 3%. So if we use the average, then that would be 2% of $100,000.00 = $2,000.00.
Add it all together and you have earned $10,650.00 total on one deal. The nice thing about this example is that you earned $2,000 up front and $60 a month in positive cash flow. Complete 3 or 4 of these a month , it can increase substantially over time .
Asset based loan, stock loan, asset loan
