Not every seller is a best fit for a sandwich lease option. Many and even most are good fits, but you must know when a potential deal is going to work out for both of you.
In many markets, you can find 100 or more possible deals each week. But which ones should you make?
Information Needed to Find the Best Sellers
Shortly after you establish rapport with a potential seller you need some basic information. You can’t move forward with a sandwich lease option until you know how much the seller wants to sell for. Then you need to know how much you can sell it for to a tenant-buyer. The best way that I know of to learn what you can sell it for is to have your real estate license. This gives you access to the MLS so that you can use comparable houses for a market analysis. The other reliable way you do this is by Working with Realtors that have access to the MLS.
The sales price is how you begin determining if the seller is right for a sandwich lease option. You’ll also discover many more big profit tips in chapter 4 of the Sandwich Lease Options Course. A critically important tool that you need to use is the Profitability Work Sheet. It shows you the profit you can make based on the seller’s price, the market price, and other variables that go into the deal.
The most important parts of the Profitability Work Sheet are the Price, Payments, and Length of Time. You negotiate these to make the deal work for both of you and the seller.
Seller Objections are Good with Sandwich Lease Options
There are amazing secrets revealed for negotiating deals with sandwich lease option sellers. One secret that almost no one catches is when a seller has a strong objection to an offer that you have made.
A knowledgeable sandwich lease option investor LOVES seller objections. Objections are buying signals. Seller objections say that the seller is interested in the deal. What they need is more information before they can make a selling decision.
When sellers have objections, they want to talk more. They want more information!
When you hear a seller make an objection, write it down. Ask the seller to clarify exactly what he or she is concerned about. Take notes and refer back to them. Objections are your opportunity to answer the specific questions that the seller has. But first, you need to get to the root of the objection. Remember that most sellers don’t know very much about sandwich lease options. You need to help them learn what they need to know. A common objection is, “Your offer isn’t enough.” But exactly what does that mean? Does it mean that you’re not offering a high enough purchase price? Not enough upfront money? Not enough monthly rent? Getting to the root of the objection is how you bring a good seller on board.
Anticipating, discussing, and overcoming objections is often the bulk of the action that you take to help a seller understand the lease option. There may be several objections or questions but that only means that the seller is highly interested in learning more about what you can do for them. Of course, sellers are skeptical. You’re talking about taking control of one of their most valuable assets. You must overcome objections when buying real estate with lease options.
Always Listen Carefully for Seller Objections!
Sandwich Lease Options are an Option to Profit
What the seller is looking for is a deal enabling him or her to start generating cash from the property right away to cover the mortgage payments and have a positive monthly cash flow. You make money in the middle.
You’re looking for Sam the Seller who is opened-minded to you explaining the details of a lease option. He’s attracted because you help him cover his mortgage and put positive cash flow into his pocket each month. (Some sellers are best served using the Subject to Existing Financing method).
Here is an example of sandwich lease terms that you could negotiate with the seller:
Option payment: $1,900 (first month’s rent plus $1,000 option payment)
Rent: $900 per month
Option Term: 2 years
Sales price: $175,000
Your total out-of-pocket expense is $1,900 to take control without ownership using lease options. Better yet, you instantly recover those expenses by putting an already qualified tenant-buyer in place. Your next step is bringing in Bill the Buyer who you prequalified. He is excited about the opportunity of future ownership through a sandwich lease when he qualifies to purchase within 18 months by taking out a mortgage. You need the 6-month cushion (2 years – 18 months) between your deal with the seller and your deal with the tenant-buyer so that you are still in control when the tenant-buyer makes the purchase.
Here is how the bulk of your profit is made. Your contract with the tenant-buyer looks something like this:
Option payment: $8,100 (first month’s rent plus $6,000 option fee)
Rent: $1,300 per month
Term: 18 months
Sales price: $189,000
The people you are doing business with LOVE this because you are offering win-win-win contracts.
Your Takeaway from a Sandwich Lease Option with the Right Seller
You quickly recover your out-of-pocket expenses by making a decent profit from the higher option fee and the slightly higher rent. The higher rent brings ongoing positive cash flow for you. Your biggest payoff comes from the difference you pay as the purchase price to the seller and what the tenant-buyer pays when he finalizes the purchase. Count 3 profit points – 1. higher lease option fee, 2. higher monthly rent, and 3. higher purchase price.
Circumstances with different sellers do change the final profit you make, but in this arrangement you’ll see a total profit from the deal of at least $21,000 (a 1,115% profit over your cost in the deal). By putting one or more of these deals in place each month you soon have a hefty five-digit income every month as more and more of these deals close.
Many, many sellers benefit from sandwich lease options. Every one of the 30% of homeowners that own their home free-and-clear will do well with a sandwich lease option. So will any seller that has some equity but doesn’t own the house free-and-clear. Plus, the ones that need “Good Debt Relief” regardless if they own it outright or only have some equity. Add all of these together and you’ll find that a high percentage of homeowners are candidates for your sandwich lease options.
Deals are everywhere. You just need to know how to find them. The Big Key is learning how to fine-tune a sandwich lease option to each situation.
Here is what you need to know about every profitable deal that is out there!
- Investing In Real Estate with Lease Options.
- Advanced strategies for Buying and Selling with Lease Options.
- You’re Wealth Building Arsenal.
- Working with Realtors
- Cooperative Lease Options.
- Add Personalized Coaching.
- Expand to Get the Deed “Subject To.”.
By Wendy Patton
For more than 30 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.
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