How to Make a Sandwich Lease Option Offer

 

Hey there…

So, in my last email, I talked about the easy way to find comps and come up with your cash offer price.

I’m following that up today with details about making a sandwich lease options offer. It’s really a lot more simple than you think.

Let’s do this…

First, get the ARV (after repair value) by averaging the property price from 5 or 6 different sources like Zillow, Redfin, Realtor.com, Eppraisal, PropStream, Real Quest Express.

Multiply the average by 85%. 

Doing that means I can tell the seller that I can give them the same equity they’d get if they sold with a realtor. 

Next, figure out what kind of rent that property would rent for. 

Let’s say it rents for $1,700 a month. Well, I’m going to offer the seller 75% of the rent, because I want at least $300 to $400 a month in cash flow.

That means: I want 25% of the rent for cash flow and 15% of the price for the equity of the property. And that’s my offer. Plus, I try to get the contract for 5 years, and I might put $500 to $1,000 down. 

Let’s do an example…

There’s a $100,000 house. I’m going to give the seller a lease option contract for $85,000 for 5 years. It rents for $1,000 bucks a month, so I’m going to lease it from the seller for $750 a month.

I tell the seller: “I’m going to take care of all of the day-to-day maintenance and repairs, and the vacancies so you don’t have to worry about that anymore.” (BTW — I’m passing on the maintenance and repairs to the tenant-buyer.) 

So, to get a tenant-buyer in the house, I’d advertise the contract for $110,000 with $1,000 a month in rent. 

So, what are my profits? 

$110,000 minus $85,000 = $25,000 back in profit. And then I’m making $250 a month in cash flow, which is $3,000 a year. With a 5-year deal, that’s $15k + $25k = $40,000.

Not bad, right?

And remember, you shouldn’t be doing this… finding comps and getting your offer price is something a VA can and should do — because it’s super simple and easy. 

Final note: You’re going to make mistakes. You’re going to fail. You’re going to make a super-low offer. A lot of ‘em. That’s okay. Sometimes the seller actually accepts it. If your offer doesn’t make you queasy — you’re offering too much.

Now, get out there and make it happen. You have offers to make.

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