How do you properly close on a sandwich lease option?

there is no closing on an L/O. If doind a sandwich L/O, you make one L/O contract with the seller with terms that are favorable for your area and then market it to a tenant/buyer who signs another L/O with you. If done correctly;

1) your option fee to your seller is lower than the one to your tenant/buyer

2) your monthly rent is higher from your tenant/buyer than to your seller

3) your option PRICE is lower to your seller than it is from your tenant/buyer.

When done correctly, you make money in all three phases. But you have to be careful with L/O in 2 main areas:

1) if you have a vacancy, you are still responsible for the rent to your seller under your contract with them

PS - It usually doesn't work with a Realtor involved as their fee may eat into the L/O fees generated by the Tenant/buyer thereby rendering your cash reserve to zero from the deal.

2) you can't set your option prices unrealistic on either end as it won't make sense at the end of the L/O for your tenant/buyer to pull the trigger.

Hope this info helps. Good luck with your property.

It sounds like you need a new realtor and you should have a real estate attorney on your team. He would explain to you exactly what Bill did in his post. You should be giving full disclosure trhoughout the process anyway so the seller shouldn't be surprised.

Most realtors are not familiar at all with how L/Os work.

Google Wendy Patton. She specializes in L/Os and has a lot of very informative articles on her website. She also has a book that is excellent that goes into great detail. "Investing in RE With Lease Options and Subject-To Deals". It will give you just about all the info you will need.

If you ck out my journal, post #190 I list the forms you need to use for buyer and for seller.

http://www.deangraziosi.com/real-estate-forums/investing-journals/59128/...

Hope that helps.

Karen

"PS - It usually doesn't work with a Realtor involved as their fee may eat into the L/O fees generated by the Tenant/buyer thereby rendering your cash reserve to zero from the deal."

Offer the realtor 25% of the option fee and let them negotiate with the owner to defer their commission (based on your option price) until the tenant buyer exercises their option.

You always want to be up front with anyone you are dealing with. Credibility is key in this business and you don't want a black mark on your reputation just getting started. Read Bill's post above. This is what you should be concerned with...Jan

Ok I was concerned about selling the property for a higher price because I have heard stories about this kind of strategy blowing up in other investors faces. However I'm going to go forward with it and just tell both parties up front what I'm doing that way there will be no confusion.

The first thing I will do is create a disclosure form for the seller indicating that i will make a profit from this option. Then I will let the buyer know that they are sub leasing the home from me and they will be buying the home based on my terms and not the owners terms. I will not reveal to the buyer that they may be paying more.

That is the major concern that I have because people these days tend to get upset if they find out they could have paid less to begin with.

Frederick that is why you are an investor a they are renters and buyers, you are in business to make money and never be afraid of upsetting anyone as long as you are honest and upfront they will have know reason to complain.

to be honest with each party individually; but you are under no obligation to tell your whole strategy or profit amounts or monthly positive cash flow to either party. As long as you keep your word with each side, you'll have no trouble moving forward.