Selling Real Estate on Lease Options

In my three decades of real estate investing, I’ve never found a lower risk or more profitable strategy than selling real estate on lease options. I’m completely confident that you’ll be rewarded in the same way. Best yet, when you do this the right way, with a sandwich lease option, it’s a win-win-win for the property owner, you as the investor, and the end buyer.

Selling real estate on lease options using a sandwich option delivers the same three major financial rewards to both you as the investor and to the seller of the property. If you’ve ever wondered why a seller would agree to have you put a sandwich lease option together for them, the answer is because it provides immediate and tremendous benefits for the seller. The seller’s benefits begin immediately when a vacant or unaffordable property begins bringing in income from a property that was a financial drain only a couple of days ago. The property switches from costing the seller money to paying money overnight. That is the number one reason sellers love sandwich lease options.

How Selling Real Estate on Lease Options Pays Investors and Sellers

Imagine you know about a vacant house that you are paying on every month. One the owner  would rather sell than be the landlord of. But selling means the house will probably sit empty for another 3 to 6 months while the owner keeps paying the mortgage, utilities, and other costs – all without a nickel of income. Plus as the seller they will have to spend a few thousand more dollars preparing to sell the house on the retail market. It’s all a dreadful financial drain!

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Imagine the house immediately starts paying a profit to the owner (and to you as the investor). That’s the difference selling real estate on lease options makes – X3. As the investor, you take out a lease option with the seller that immediately pays him or her the option fee plus starts paying the monthly rent (that’s two of the three financial benefits for the seller). You then immediately put an end buyer in place that pays you a higher option fee and higher rent (that’s two of the three financial benefits for you). This all happens within a week or two to turn a money pit into an income stream for both you and the seller.

The third payout for both you and the seller takes a little longer but is the biggest of the three payouts. That’s when the end buyer obtains financing to complete the purchase of the house.

Why Selling Real Estate on Lease Options is WIN-WIN-WIN

Selling real estate on lease options is the quickest and least expensive technique available to investors. As the investor, you don’t have to meet the high and often unreasonable underwriting requirements of banks and other institutional lenders. Owner/sellers require very little documentation from lease option investors. The option fee substitutes for a down payment that the seller immediately puts in his or her pocket – without closing costs and without tons of documentation.

The seller is basically financing the property for the rent money – giving you control without ownership. The seller doesn’t need a bunch of documentation because he or she is still on the title of the house. What they are getting is cold hard cash for a property that was a dark pit swallowing cash a few days ago.

End buyers want lease options because of the little up-front cash required to get into a home they will soon own. The buyer is entering into a contract to purchase the house; he simply hasn’t completed the purchase.

As the investor, your goal is paying as low of an option fee to the seller as possible while collecting a higher option fee from the buyer. Sellers willing do this in exchange for the outstanding benefits they immediately receive.

During the option period, the house is appreciating in value. At the end of the option period, the house is worth more to the buyer than you owe to the seller. This builds in an extra profit margin for you as the investor. First, you negotiate a lower selling price with the seller than you will collect from the buyer. After the house appreciates in value for a year or two, the end buyer already has money in the house and is happy to complete the purchase for the higher selling price that goes into your pocket. Selling real estate on lease options is all about controlling the property without owning it!

All other investing methods are about one of two methods – 1. Buy and sell (flipping) or 2. Buy and hold (landlord). Selling real estate on lease options is the only method that combines the best of both to maximize profits when investors both collect rent and sell the property in a single deal. And it gets even better because with that you collect a higher rent that is paid on time, have a tenant who accepts homeowner responsibility, and you have a pre-determined sales price. Selling real estate on lease options is all about lowering your risk while maximizing your profit.

By Wendy Patton

For more than 35 years, I’ve used the Sandwich Lease Options System to earn myself and my students multiple millions of dollars. From my experience, I know there is plenty of room and opportunity in the real estate investment market for everyone wanting to participate and find profitable deals. It’s because of that fact and my personal success that I share the Sandwich Lease Option System with others.

If you found this information useful, please visit again soon at wendypatton.com.

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Buying Real Estate with Lease Options

Many real estate investors think the only two strategies available are either “buy and sell” or “buy and hold.” After all, that’s what the big financial institutions tell investors they should do. You can take out a 30-year mortgage to buy and hold real estate or you can flip a few properties each year using your own money or by having a money-partner. The same thing happens on Wall Street where the common advice is to buy and hold. Or the more adventurous become day traders, which is a form of flipping.

But there is a much better alternative with real estate – you reduce risk and make more money working outside the box when buying real estate with lease options

Many Strong Reasons Why Buying Real Estate with Lease Options Works Well

“Lease option” is a somewhat legal term for what is more commonly known as “rent-to-own” (also known as lease-to-own, lease/purchase, or lease with an option to purchase). Many people are familiar with rent to own for living room furniture, washer and dryer, and other household appliances. These businesses have been around as long as I can remember. And there is a good reason these stay in business – because they work. They work particularly well for people with limited resources but who are earnestly working to build a future. And it’s no different with real estate. Rent to own customers are the same hard working and sincere people who will be some of your best end buyers when you use the technique of buying real estate with lease options.

I’ve studied and worked with many investing methods over the past 30 years. I’ve had success with various methods. Today, I don’t hesitate for a second to state that I am fully resolved that buying real estate with lease options is the fastest, easiest, and least expensive way of investing in real estate. And highly profitable!

Sandwich Lease Option Investing

One version of buying real estate with lease options is the sandwich lease option. This version requires the least amount of money on the part of the investor (you). You seek out a willing and distressed seller (yes, these exist in today’s markets) to help solve a problem for them. The problem to be solved is almost always financial but can come in many different forms. One of the most common is someone who needs to move a long distance and needs to sell fast. Another is someone that has inherited a house and is now expected to pay the taxes and insurance along with other costs. Still another distressed seller situation is someone who has a house in dire need of repairs and maintenance.

In the sandwich lease, you gain control of the property by paying a small lease option fee. You then flip it into another lease option to an end buyer (someone that wants to live in the home). Even if the house needs repairs, you can make most of those repairs the responsibility of the end buyer in exchange for a reasonable purchase price.

One of your many benefits with the sandwich lease option is the repairs improve your equity position even if the purchase option is never exercised. Just as importantly, the end buyer becomes more motivated to complete the purchase because they now have sweat equity and/or money invested in the repairs. The entire deal becomes a win-win-win for everyone involved. The seller has his or her problem solved, you make a reasonable profit in the middle of the sandwich lease, and the end buyer is in the position to become a homeowner.

Buying Real Estate with Lease Options Combines Strategies

We know most investing is based on one of two strategies. One is buy and hold long term for the cash flow. The other is buy and flip for a fast profit. Buying real estate with lease options is the best of both worlds by combining both strategies.

The lease side is essentially, a buy and hold strategy. You may not have bought the property outright but you do control it during the time of the lease. This entitles you to the rent profits as if you did own it. Also similar to buy and hold, you gain the appreciation in value when you sell in a sandwich lease arrangement. Even better, you accomplish this without the risks and responsibilities of actually owning the property.

The combination also comes with the flip advantage. Basically, that is exactly what you are doing by flipping it quickly (within days or weeks) to an end buyer for a profit at the end of the deal. Obviously, their option to buy – for a pre-determined price – is a huge part of the deal. It’s your biggest payday. It doesn’t get much better than having the advantages of both strategies – buying and selling PLUS collecting rent by holding the property in your portfolio.

There are even more benefits to buying real estate with lease options that you want to discover. Without a doubt, you now understand why I am fully resolved that buying real estate with lease options is the fastest, easiest, and least expensive way of investing in real estate.

By Wendy Patton

For more than 35 years, I’ve used the Sandwich Lease Options System to earn myself and my students millions of dollars. From my experience, I know there is plenty of room and opportunity in the real estate investment market for everyone wanting to participate to find profitable deals. It’s because of that fact and my personal success that I share the Sandwich Lease Option System with others.

If you found this information useful, please visit again soon at wendypatton.com.

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Control Without Ownership Using Lease Options

Working smarter rather than harder is the best business strategy. That’s exactly my concept behind the control without ownership using lease options  series. The exception being lease options have a highly profitable twist. Control without ownership is about working smarter instead of working your bank account.

Not only do lease options require much less money, lease options will always have a much higher cash-on-cash return. That’s pretty much inevitable considering the sandwich lease option generates a minimum of three profit streams compared to one(sometimes two) profit stream  when you own the property outright. I’ll put some emphasis on the three profit points near the end of this blog, but let’s begin with why the cash-on-cash return is so much better when you take control without ownership using lease options.

Why Control Without Ownership Using Lease Options Earns Enormous Cash-on-Cash Returns

The cash-on-cash formula is very simple but also very important.

This formula simply calculates how much cash you earn compared to the amount you invest. It doesn’t include money that you borrow or equity that you might have in a property. It only involves the cold hard cash you invest in a property and the cold hard cash the property earns for you. Cash you can do anything you want with – cold cash!

Only two numbers are needed to make this calculation. You need to know how much cash “flowed” to you from the investment and how much cash you invested. Dividing Cash Flow by Cash Invested equals your Cash-on-Cash Return.

A simple bank savings account demonstrates how this works. I’m going to use a simple interest rate instead of compound interest to keep the math easy. You deposit $10,000 into a savings account at the beginning of the year that pays 2.5% annual interest. At the end of the year, that $10,000 has earned $250 of interest.

The cash-on-cash formula is: 0.025 = $250 / $10,000.

The only thing the formula did is convert the 2.5% into a ratio. A 0.025 cash-on-cash ratio that is very, very low.

When you have control without ownership using lease options, it’s more than reasonable to expect a cash-on-cash return of 1.00 (100% interest rate) or much, much higher. This means investing $10,000 of your cash both returns your full $10,000 plus earns you $10,000. At the end of the deal, you could have $20,000. Of course, that is much better than the $10,250 you could have had by simply putting it in a savings account at 2.5%.

You don’t need $10,000 to get started. It’s just a nice round number for the example. You can easily get started for $1,000 or less.

Earning that 100% by having control without ownership using lease options is where the three profit streams become critically important.

3 Profit Streams Through Control Without Ownership Using Lease Options

I frequently talk about the three profit streams that a sandwich lease option provides to you, so I’m going to be brief here.

  1. You make money from the lease option.
  2. You make money on the monthly rent.
  3. You make money when the house sells.

But you never own the house.

Your Sandwich Lease Option Cash-On-Cash Rate of Return

Let’s say for example you talk with Sam the seller and he sees how he will benefit by allowing you to take control without ownership using the lease options when his mortgage payment is covered and he receives positive cash flow each month.

Here are some sample terms that you could negotiate:

Option payment to Sam: $1,000.

Rent: $700 per month.

Option Term: 2 years.

Sales price: $75,000.

Your cash expense is $1,700 to take control without ownership using lease options. Best yet, you almost immediately recover that expense as soon as you put an end buyer in place.

Your next step is bringing in Bill the buyer, who you prequalify. He is excited about the opportunity of future ownership through a sandwich lease when he qualifies to purchase in 18 months by taking out a mortgage.

You need that 6 month cushion between your deal with the seller and your deal with the buyer so that you are still in control when the buyer makes the purchase. That is when the bulk of your profit is made. Your contract with Bill the buyer might look something like:

Option payment: $3,000.

Rent: $900 per month.

Term: 18 months.

Sales price: $89,000.

  1. Your first profit point is the $2,000 difference in the option you pay Sam compared to the $3,000 you collect from Bill.
  2. Your second profit point continues every month for the next 18 months when you collect $200 more in rent each month (totals $3,600).
  3. Your third profit point comes when Bill completes the purchase for $14,000 more than you owe Sam.
  4. Your total earning are: $19,600 ($2,000 + $3,600 + $14,000).

So how much is your cash-on-cash return?

Your cash expense for putting this deal together was $1,700. Keep in mind that you recover that $1,700 plus make $2,200 ($3,900 – $1,700) as soon as Bill the buyer comes on board. There’s good logic in saying that you really didn’t have anything in the deal. But since you did have $1,700 at very low risk, we’ll use that for the cash-on-cash formula.

CASH-ON-CASH Return Formula:

11.53 = $19,600 / $1,700

That’s a phenomenal cash-on-cash rate of return!!

You can convert that back into an interest rate by multiplying by 100.

11.53 X 100 = 1,153%  

Compare that to a savings account interest rate of 2.5%. By taking control without ownership using lease options, your rate of return is 461 Xs more than what most money is earning in a savings account.

Now, imagine that you roll part of that almost free money into another sandwich lease option. Your cash-on-cash return is almost unlimited because you no longer have any of your original investment in the next deal or any deal after that.

By taking control without ownership using lease options, you use little or no money and take very little risk. That’s Right! Say Goodbye to the expensive, high maintenance rental business. Say Hello to sandwich lease option investing!

What you need to do now is TAKE ACTION!

By Wendy Patton

For more than 35 years, I’ve used the Sandwich Lease Option System to earn myself and my students millions of dollars. From my experience, I know there is plenty of room and opportunity in the real estate investment market for everyone wanting to participate to find profitable deals. It’s because of that fact and my personal success that I share the Sandwich Lease Option System with others.

If you found this information useful, please visit again soon at wendypatton.com.

For more exclusive content, please subscribe to my RSS Feed and YouTube Channel.

What did you think of this article? Please leave a comment below.

Overcoming the Fear of Real Estate Investing

Real estate investing success is happening all around you. You see it on TV. You hear about on coffee breaks at work. Your parents have been homeowners as long as you can remember. Maybe your cousin even made a decent chunk of change flipping an inherited rental left to her by her mother.

So why do you have an unnatural fear of real estate investing? And more importantly, what’s the first step for overcoming the fear of real estate investing?

Let’s begin by better understanding the fears that keep people from making what is often the best financial decision they will ever make!

What are Those Fears?

Fear can be paralyzing. It can be the root cause of why you’re not realizing your dreams and why you’re not making progress towards the life that you want and could have. Fear is so powerful that it can even keep you from dreaming of a better life.

Real estate investing is not a life or death decision. The number one fear is a fear of failing. People fail at many things but get right back up and have great success the next time. Fear of failing leads to analysis paralysis. It leads to inaction. Overcoming the fear of real estate investing only requires having a plan that you trust in. A plan that minimizes the chance of failure and maximizes the reward.

Sure, you probably won’t become an overnight millionaire with your first deal. You might not even make as much profit as you hoped for. But you will gain experience. You will learn an incredible amount about the process. You will gain the confidence to improve and do even better the next time.

Overcoming the Fear of Real Estate Investing Starts with Knowledge

Let’s dispel one major fear – it doesn’t take a lot of money when you use the proven strategies and techniques that I used to build my own fortune. My lease option system is all about controlling property without owning property. It’s about turning your fear into a hero’s story. It begins with a symbolic milestone. It’s about taking a mature step towards being a self responsible adult in charge of your own life. It does take courage (and encouragement) to succeed!

Overcoming the Fear of Real Estate Investing is a Process

This is framed as overcoming the fear of real estate investing but really it’s about decision making. It’s about making decisions based on facts and data rather than having to attend Aunt Gertrude’s cocktail hour conversation about a hunch she has about neighbor selling their house down the block.

Think for a moment about other times you made a financial decision. Maybe it was a car or stocks on Wall Street , or even your college education. You didn’t make the decision lightly, did you? Proper decision making is about developing a list of criteria that needs to be met. Then you look for opportunities meeting most or all of your  criteria. For a car, it might be gas mileage or safety features. For Wall Street stocks, it might be a history of earnings or future potential. For your college degree, it’s a mix of the right courses, knowledgeable professors, and affordability.

You need to first develop a reliable framework of criteria specifically related to real estate investing. And here is the framework for overcoming the fear of real estate investing:

  • Expert advice from a mentor or coach.
  • Educate yourself about real estate investing.
  • Preform risk – reward analysis on lease options.
  • Conduct due diligence on specific properties.
  • Use other people’s money by controlling instead of owning.
  • Reap the rewards.
  • Enjoy the experience.

I’ve enjoyed my own great success and believe there is plenty to go around for everyone. I have personally published multiple books and videos helping many others get started in real estate. I also offer courses. Another easily available resource is a local real estate agent who can help you understand the local market.

Lack of experience is a big hurdle to overcoming the fear of real estate investing. You overcome that hurdle by putting together a plan, attending seminars, and using proven resources. Then you have an expert and others with experience review your plan and make suggestions. Next, find a few potential investment properties. Using your knowledge and plan, run the numbers for each property and have an expert look at what you came up with. There really isn’t much more to overcoming the fear of real estate investing.

What To Do Now

Your fears are real but they prevent you from taking action. There are some fears that are healthy but in business, fear can limit your ability to truly be successful. In the pursuit of financial freedom, fear must be faced and overcome. You take control by expanding your knowledge of the risk and reward fundamentals.

And then you take action. With a proven process, the rest all falls in place!

Are there risks? Yes, there certainly are risks. But those risks are much greater when everything remains unknown. The risks increase when you have too much of your own money tied up in a single property. Sandwich lease options provide maximum diversity by controlling multiple properties while minimizing the risk that comes with ownership of a single investment property.

You will profit and succeed by overcoming the fear of real estate investing with lease purchase options. The bottom line is that the more you learn, the more you earn.

By Wendy Patton

For more than 35 years, I’ve used the Sandwich Lease Options System to earn myself and my students multiple millions of dollars. From my experience, I know there is plenty of room and opportunity in the real estate investment market for everyone wanting to participate and find profitable deals. It’s because of that fact and my personal success that I share the Sandwich Lease Option System with others.

If you found this information useful, please visit again soon at wendypatton.com.

For more exclusive content, please subscribe to my RSS Feed and YouTube Channel.

What did you think of this article? Please leave a comment below.

Lease Option Coaching FAQ – For Investors

Lease options are easy with a basic understanding about renting residential houses along with the basic house selling process. The simplest lease option is most suited for one-time sellers who want to use a creative approach to obtain the most cash flow and best selling price for a house. It could be the one-time seller’s primary residence or it could be an investor-landlord who owns a house in need of a creative sales approach. However, in this blog, I want to focus on sandwich lease option coaching FAQ.

The sandwich lease option builds on the basic lease option by bringing in a willing seller that you work with to connect with a tenant/buyer. The sandwich lease option simply adds one more step in the basic lease option process. In exchange for adding another easy to follow step, you create additional cash flow and profit for yourself as an investor – without ownership!

To your Success,

Wendy

Sandwich Lease Option FAQ for Investors

Q1: What is the biggest difference for investors between a basic lease option and a sandwich lease option?

A1: The biggest difference is as the investor in a sandwich lease option, you don’t own the house. The tremendous advantage here is you have all upside in the deal with almost no down side. Along with minimal risk, you create an additional profit source with the sandwich lease option that isn’t available with the basic version.

Q2: What is the big difference or extra step in the sandwich lease?

A2: The main difference is while you don’t own the house,  you do control the paperwork. Not owning the house is how you minimize your risk. Controlling the paperwork is how you create the additional profit source. So for investors, the sandwich lease option is primarily about the paperwork.

Q3: What do I need to know about the paperwork to get started?

A3: This is the big question I get the most frequently as a Lease Option Coaching FAQ. Let us  begin with how the paperwork is organized and then move into some of the paperwork details. You essentially have two separate but related deals going on. The basic organization is creating two separate files that are kept together in your file system. In a computer, you create a folder with the street address of the property involved. Inside that folder, you create one subfolder for the seller’s paperwork and another subfolder for the end buyer’s paperwork. This makes everything for sandwich lease options easy to find when needed.

Inside of each subfolder are three main documents. You can reduce these down to one or two documents. However, three documents simplifies everything and keeps the intent clear about the three transactions you have with both the seller and the end buyer. These are also your three profit sources or profit points. The three main documents and profit sources are:

  • Rental/Lease Agreement
  • Sales Agreement
  • Option Agreement

So, that is six different documents. One of each of the above to be signed by you and the seller and a different set that will be signed by you and the end buyer. The structure of each document will be the same for both the buyer and the seller versions. However, what is critically important are the dollar amounts, dates, and a few other variables. The difference between those dollar amounts, dates, and variables determine how much profit you make with a sandwich lease option. This is really as simple as some addition and subtraction math.

One important difference is you’ll require the seller to maintain insurance on the house and put you on the policy as “additionally insured.” You will also want the seller to sign off on an “Affidavit of Liens,” a “Sellers Disclosure,” and “Bank Authorization.”

That’s it, that’s the basic paperwork!

Q4: That doesn’t seem like much paperwork but how does everyone stay protected to keep this a minimum risk transaction?

A4: Another great question; because the sandwich lease option really is about the paperwork rather than you risking your own money. But you do want to protect your position in the deal. You have an “Affidavit of Liens” from the seller that is supposed to disclose any liens on the house (tax liens, mechanic liens, etc.). But it is still in your best interest to have a title search done to be sure there are no liens or that you at least know about any liens. In most states (probably all states), you cannot purchase title insurance because with sandwich lease options, your name is not on the title. That is the reason you have the seller sign an “Affidavit of Liens.” It says that the seller is not aware of any pending liens and that should any arise, you will be formally notified. You can never be sure that the seller didn’t recently have major repairs made to the septic system (or something similar) and failed to pay for it.

Another reason for a title search is to be sure all of the names listed on the title are also the names on your option lease paperwork. It’s not all that uncommon following a divorce for the title not to be updated when one spouse is given full ownership of the house.

Q5: What else is important to know about a sandwich lease option?

A5: You want to record a “Memorandum of Option” with the county to establish your legal interest in the property. Your lease option paperwork defines your interest in the property but a “Memorandum of Option” informs everyone (including the courts) that you have a legal interest.

You don’t want to skip any steps or leave any blanks on the paperwork. Until you’ve completed a few sandwich lease option deals, you want to have the draft and completed paperwork reviewed by a competent attorney before signing it. I make at least four copies of each file. You need one set of two for you and the seller and a separate set for you and the end buyer. I prefer everyone have their own copies with original signatures.

By Wendy Patton

For more than 35 years, I’ve used the Sandwich Lease Options System to earn myself and my students millions of dollars. From my experience, I know there is plenty of room and opportunity in the real estate investment market for everyone wanting to participate and find profitable deals. It’s because of that fact and my personal success that I share the Sandwich Lease Option System with others.

If you found this information useful, please visit again soon at wendypatton.com.

For more exclusive content, please subscribe to my RSS Feed and YouTube Channel.

What did you think of this article? Please leave a comment below.

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