The cooperative lease option (also known as wholesale lease options) can deliver a payday in a few hours under the right conditions. But as full disclosure, it will probably take a day or two. It is cutting edge but I have also proven many times that it works. Because it is still cutting edge, you won’t find it in any real estate textbooks. It will get there eventually and that’s when more and more investors will have already jumped into this niche.
Cooperative Lease Options Basics
There are two basic versions of cooperative lease options. In one version, you wholesale the lease option to another investor. In the second version, you sell the lease option directly to a tenant/buyer. In either version, all you need is a lease option with a seller. The cooperative lease option is a unique twist on the sandwich lease option. To keep this blog focused on cooperative options, I assume you know the nuts and bolts of the sandwich lease option.
What’s great about a cooperative lease option is that it pays you a decent amount of money much faster than a simple lease option or a sandwich lease option. A sandwich lease pays you three times but you have to remain in the deal much longer. With the cooperative lease option, you are only paid one time but you are in and out of the deal very, very quickly.
If you sell the option to another investor, you will have to leave a decent amount of meat on the bone (money). However, a savvy investor will recognize a great deal when he or she sees it and produce your cash immediately.
If you sell the option to a tenant/buyer, more of the meat is for you but it may take it a little longer to educate the buyer about lease options. Ultimately, what the cooperative lease option does is put one more tool in your investing toolbox. The more tools you have, the more deals you can custom build to meet the needs of others.
Getting Paid for Cooperative Lease Options
A cooperative lease option requires little or no capital from you as an investor. The key is establishing a purchase option with a seller that is ‘assignable’ to a third party. As always, the details are in the contract when it comes to creative real estate investing. The person you will assign the contract to is either another investor or a tenant/buyer. A key difference here is that in a sandwich lease option, you collect an “option fee.” With the cooperative lease option, you collect a “finder’s fee” for transferring your option to another person.
When you do that, you are paid quickly and out of the deal quickly. This works for any investor but is especially attractive to beginning investors. When you can get out of the deal quickly, you don’t have any other expenses such as painting the house or making cosmetic repairs. Other investors understand this immediately. If the assignee is a tenant/buyer, you may need to explain that a lease with an option to purchase involves the tenant/buyer assuming more ownership responsibilities. In any lease option, ownership responsibility is a ground-rule a tenant/buyer must understand from the start.
So, the bottom line with a cooperative lease option is that you pay a small option fee to the seller for an option that is assignable. You immediately sell it to another person for your profit. I love sandwich lease options but I don’t know of a faster way to make a profit than with a cooperative lease option.
The Fastest Way a Cooperative Lease Option Works
As with most creative investment techniques, there are multiple ways of setting up these deals. If you already have a tenant/buyer, you can sell the option directly to that person. They are then working directly with the seller and you move on to your next deal.
In many cases, you won’t have a tenant/buyer. This is when your efforts should be with other investors who understand sandwich lease options. You’re leaving at least two of the three paydays for this investor to collect. It’s up to the other investor to put together a sandwich lease option to collect those two paydays. (See the sandwich lease material to fully understand the three paydays).
You are also leaving this investor with the choice of finding a tenant/buyer for a sandwich lease or simply taking ownership of the house at a future date for the option price. Investors love having choices. This makes other investors the fastest path to your payday with a cooperative lease option.
Even better is you also have more choices with the cooperative lease option…
Using a Cooperative Lease Option to Complete a Sandwich Lease Option
One of the best things about being a real estate investor is your ability to write contracts in many creative ways. Another even more profitable version of the cooperative lease option is when you have the end buyer. You keep the contract in place between you and the end buyer until he or she is ready to make the final purchase. But maybe you aren’t able to complete the sandwich lease purchase in the end. Who knows where your finances might be two years down the road?
If you don’t have the money when the time comes, you can bring in another investor to assign your lease option to and he or she makes the purchase from the original seller. The other investor then sells to the end buyer. In that scenario, you are able to collect the higher lease option fee from the tenant/buyer and the higher rent until the final purchase is made (2 of the 3 paydays). But the other investor collects the third payday that is the difference between the option price and the tenant/buyer’s purchase price.
It’s always about a win-win-win for everyone. Real estate investing is all about finding creative solutions that work for you and others.
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.
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