An Overview for the Way to Future Financial
Freedom (FX3)
for the Real Estate Investor
Part 2 of 2
Lease options were defined in Part 1. In Part 2, we
will talk about structuring a lease option.
Common Lease Option Deals
My typical strategy is to lease option from a seller and then to lease
option that home to a buyer.
How Lease Options Work
(may buy)
(may buy)
The above illustration depicts a “sandwich lease option.” In a sandwich the
meat is in the middle. The best part of a sandwich is the meat, and you (the
investor) are in the middle of the transaction. Your reward is the meat --
the difference between what you paid for the home and then what you sold it
for. For example: Seller Bob lease options his home to Investor
Wendy for $150,000 at $850 a month for 3 years. Investor Wendy then would
lease option the home to tenant buyer Sally for $180,000 and $1000 a month
and only give Sally 1 year to purchase the home. In this example, Investor
Wendy would have $150 a month cash flow and $30,000 in profit on the
difference in the price of the home (what you paid and what you sold it
for). This is a simple example in lease options, because there are so
many more things that can be negotiated in a deal.
It is very important you only work with buyers that have an opportunity to
purchase your home. I only accept applications from tenant/buyers I think
could qualify later for a mortgage. I can’t determine for sure if they will,
but a good mortgage lender can give me that advice. I recommend you
work with a good mortgage company to make that determination.
Wendy’s Ethics Rule
Don’t commit to a lease option with potential buyers
who have no way of ever being able to qualify for a mortgage. That
is being greedy and taking advantage of someone. It is not fair to
the buyer. If the buyer messes up – shame on them! If you
mess them up – shame on you!
At this time my average profit is right around $40,000 per lease option
transaction. Lease options typically turn over every 12-24 months.
Depending on what part of the country you reside in the profit range should
vary from $25,000 – $150,000 (Midwest to Northern California). You decide
how much you need to make, and then you will know how many homes you need to
lease option to achieve your goal. Not only can lease options set you up to
live today but they can set you up for Future Financial Freedom (FX3) and
retirement. Just sit back and imagine…how would it feel to be
completely debt free? Real estate is the vehicle that can allow
you to achieve just that.
© 2007 by Wendy Patton
Wendy Patton is widely
recognized as one of the most inspiring speakers on "Little or
No Money Down" real estate investing. Her real estate savvy and
great depth of experience and knowledge has helped her in
orchestrating the most complete and easy to follow, Lease/Option
Program in circulation.
Home Study Courses by
Wendy Patton
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