As a lease option coach, the number one question I get is what is the best way to get started in real estate investing. Since I focus much of my real estate career on being a lease option coach, it should be clear that is the way I think you should go. However, there are several ways to go about lease options that I introduce you to in this blog.
Wholesale Lease Options
You won’t find many people in the business of wholesale lease options. That’s good for you. The reason there are few people in this business is because it is a bit off the wall and they simply have not thought of it. But it is a great way to make some quick money with zero risk and zero of your own money in the deal. Here is step-by-step how you go about it.
- Find a motivated seller willing to sell on a lease option.
- Place the property under contract with you as the person holding the wholesale lease option. You want the contract to stipulate you are only obligated to exercise the wholesale lease option after you find a qualified buyer other than yourself.
- Find a buyer capable of paying the option fee and looking to find a qualify end buyer looking for a lease option.
- Draw up a lease option agreement with the buyer.
- Assign the lease option back to the seller.
- Collect the option fee as your payment for putting the deal together.
- You are now free to move on to the next deal with $5,000 in your pocket.
Sandwich Lease Options
The sandwich lease option is a great way to control a property with very little of your own money in the deal. The sandwich lease involves you, as the investor, paying only a small amount to bring the home under contract. You don’t purchase the home nor do you take a full lease on it until you have a passive money making deal in place. The sandwich lease is perfect for controlling properties without needing to do much work.
Run an ad on craigslist to find a seller willing to do a lease option purchase. Work with the seller to put together a sandwich lease where you bring in a qualified buyer. The contract should specify that you’re under no obligation in the sandwich lease until you have a buyer under contract.
You then write a sandwich lease with a buyer for more than the value of the contract you have with the seller. Let’s say the sandwich lease option fee you have with the seller is $2,000. You charge the buyer $5,000 to immediately pocket the difference. You then charge the buyer a higher rent than you owe the seller under your sandwich lease deal. Say your sandwich lease with the seller requires a $1,000 monthly rent until the purchase is executed. You then charge the buyer $1,200 a month to collect a monthly passive income of $200 until the purchase goes through. In the sandwich lease, you also collect a higher selling price than you are under contract for with the seller. Three profit streams!
Investing with Lease Options is Safer
At the highest level, there are two ways of investing in real estate. I’ll call them hard investing and soft investing. Lease options on real estate is a soft investing strategy because it doesn’t involve outright owning the property. Hard investing involves taking title to the property.
The bottom line is that for both new and experienced investors, lease options on real estate remain the lowest risk investment method delivering reasonable profits. Should lease options on real estate deals go south on you, you’re only out a few hundred dollars when you walk away from a deal. When you take title to a property, you’re going to have tens of thousands invested in the down payment alone and it’s 100% your responsibility to maintain and sell the property. Lease options on real estate give you peace of mind that you can walk away at any time if the deal just isn’t going to work out.
If you want to work directly with me as your lease option coach or any of my other investing models that have proven highly profitable, please join me at www.wendypatton.com/what-is-wendy-pattons-inner-circle.
Besides reading this article about lease options, you’ll want to read this other useful information that I offer free. Please take advantage of it today.
Several times each week, I make the most current real estate investing information available to readers. This time, it’s about lease option coaching but the information I provide changes constantly to stay current with the market. Be sure to check back at: www.wendypatton.com. Also, get started learning how to do NO CASH lease options on real estate by picking up a copy of my bestseller book: Investing in Real Estate with Lease Options and Subject-to Deals.
By Wendy Patton
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