I encourage you to read all of the blogs but I especially encourage reading the course material to learn all of the benefits from selling real estate on lease options. In this blog, I show you a deep dive into the dollar numbers that will inspire sellers by seriously adding to their profits. Of course, the numbers will be different for every deal but I’ve put together this chart representing a very typical deal.
Costs are less and profits are higher by selling on lease options!
A Bigger Bottom Line by Selling Real Estate on Lease Options
One of the beauties of selling real estate on lease options is that sellers are more likely to receive top market values for their houses. Prices do vary significantly by region and local markets but today, in most places, sellers are listing their house at full market value instead of needing to list below market for competitive reasons.
But that doesn’t mean retail buyers in most markets are automatically submitting full value purchase offers. Sure, in a few select markets, bidding wars occasionally break out but that’s the exception rather than the rule. Bidding wars are not at all common in most regional markets. The truth in most markets is that buyers submit offers well below the listing price intending to negotiate a final price. This has always been a buyer’s strategy as long as any of us can remember. Full value offers create the first big advantage when selling real estate on lease options. Lease to own buyers have a long-established history of offering full market value in exchange for becoming a homeowner when no one else is willing to help them.
The full market price is the first big profit point that sellers will benefit from by selling on a lease option.
The next big consideration is the option fee compared to an agent’s commission. You need to logically separate how this affects the seller compared to how it affects the tenant/buyer. For the buyer, the option fee is a no-brainer because it applies to their down payment. In a sandwich lease option, the option fee is a different case for the seller. As the sandwich lease option investor, a significant amount of your fee comes from the option fee paid upfront by the buyer. That does come out of the seller’s bottom line. In the example, your option fee is $10,000. For the seller, this is still a $2,000 savings compared to what he or she would expect to pay an agent. The seller might even benefit from part of the option fee depending on how you put the deal together.
Two more big profit points are the seller’s savings on repairs as well as not being expected to help pay the buyer’s closing costs. In the example, this amounts to another $8,000 savings (profit) for the seller. It just keeps adding up to more money going into the seller’s pocket. During the lease period, the tenant/buyer is also paying down the seller’s mortgage. In the example, this amounts to another $2,420 ($150,000 – $147,580). Individually, each part might seem like small-change but it adds up to a big profit for the seller. Another dependable profit source for the seller is collecting rent from the tenant/buyer during the lease period.
When everything is added and subtracted in the example, it reveals the seller comes out of a sandwich lease option with $92,420 more profit compared to a traditional sale!!!
Don’t Ignore the Other Huge Benefits for the Seller
Selling real estate on lease options makes life easier for the seller in many more ways. This is always a great choice in markets where sellers are having difficulty selling, especially as the economic downturn continues. There are always full price tenant/buyers in the market, even when full price traditional buyers are scarce. A tenant/buyer means almost instant income to the seller when the tenant/buyer begins making rent payments next week. Better yet, the seller doesn’t have to deal with typical landlord headaches because the tenant/buyer takes responsibility for repairs and maintenance.
Selling real estate on lease options is also a powerful tool when the seller has little equity in the house. Tenant/buyers coming in with a full market purchase offer make all of the difference when the seller owes the lender close to what the house is worth. With little equity, this is how the seller walks away with more money!
Five more important benefits for the seller until the big profit is in the seller’s pocket:
- Lease options pay the mortgage.
- Lease options pay the taxes.
- Lease options pay the insurance.
- Lease options pay the HOA cost.
- None of this happens with a traditional sale.
All of the seller’s costs and troubles are covered until the big payday happens!
Why a Seller Should Look Closely at a Lease to Own
As a sandwich lease option investor, you need to be ready and able to explain all of this to a seller because it certainly isn’t intuitive to them. Not only can you offer the seller a steady monthly income while moving towards the sale, but you can also show the seller how they will profit more by selling real estate on lease options.
The first lease option purchase offer will be a full-price purchase offer. No need for the seller to be alarmed when low traditional offers come in or months pass between any offers coming in. If the seller is already in this situation, it makes selling on a lease option all the more attractive.
There are always tenant/buyers ready to jump into a lease option purchase. Especially during times like these when it can be difficult getting a loan. Today is extremely attractive to tenant/buyers that want to become homeowners while interest rates remain at historic lows. Everything is motivating tenant/buyers and there is more than enough motivation for the seller when he or she understands the financial advantage of selling real estate on lease options.
Sellers stand out from the crowd with lease options and make much bigger profits!
Here is how you put it all together as a sandwich lease option investor:
- Investing In Real Estate With Lease Options.
- Advanced strategies for Buying and Selling with Lease Options.
- You’re Wealth Building Arsenal.
- Add Personalized Coaching.
- Cooperative Lease Options.
- Expand to Get the Deed “Subject To.”
- Round it all out by Working with Realtors.
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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