Sandwich Lease Options: Your Complete Guide to Understanding Sandwich Lease Options. Wendy Patton
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may just be in my blood. I’ve always loved a deal, and the day I realized real estate investing was that kind of game was the most important day of my life. My first house was a three-bedroom bungalow in a suburb of Detroit. I had just moved into town for a corporate job and there was no housing available—I lived in a hotel with all the other corporate recruits. My PITI (principal, interest, taxes and insurance) was $438. I rented two bedrooms to two friends from the hotel for $250 each. I had cash flow and I was living free! My $62 cash flow per month paid my credit card payment. I was 21 years old and I thought this was pretty cool! So I decided to do it again. I did that three more times that first year. I had no money or assets, but I did have credit cards (which I do NOT recommend using for real estate).
At the start of my real estate investing career, I was $20,000 in debt with student loans. In my mind, the worst thing that could have happened was that I would go bankrupt. However, I had good credit and was able to make my down payments on homes with credit cards. It wasn’t long before I had a credit line of over $250,000 – and too many credit cards. Using credit cards should be the last resort for most investors as I lost a lot of profit by having huge revolving credit card debt – even though I faithfully made payments on all of them and somehow juggled them so that no payment ever slipped through the cracks! It was, however, an administrative nightmare. Still, I couldn’t focus on that. I had to focus on what was the best that could happen. I could end up with FREEDOM and CHOICES!
When I started investing, I didn’t know about lease options. I thought what I did was a zero down deal and something very creative. I didn’t know of any gurus at the time that focused on buying on options, so I developed my own tools and systems to buy homes with little or no money down using the same techniques I was using to sell. I have since purchased almost every course available in the market on options, and learned extra tidbits from them all to add to how I do my business. I am the only national educator in the country that teaches people how to work with Realtors to find these types of zero down deals. Over the years I have fine-tuned the techniques that really work. I have completed hundreds and hundreds of lease option contracts.
I have bought and sold over 600 properties since becoming an investor in 1985. I have had as many as 175 properties in inventory at one time. My current and longer-term goal is to have 30 free and clear in my inventory. Thanks to the turn of events in Michigan, I am well on my way. I have invested in multiple states and continue to look for new opportunities throughout the country and internationally, but at his time have found my best deals close to home.
Whether you’ve left your job to pursue your own dreams of becoming a baker, a pilot, an artist or a Realtor® – we all have the same concerns and fears about starting out in a new business venture where we have to rely on our own efforts to make a payday. Even then, the first couple of years can be rough. It takes a while to “pay your dues” in any new skill – and learning real estate is a skill – but real estate not only has immediate profits through lease options, it can automatically provide investment income by the very nature of appreciation or equity buildup (to be discussed later in this book). Real estate builds a tangible future that can set you up for life if you have the passion and the drive to dig in and overcome the fears of trying something new.
I am so glad I pursued my dreams in real estate many years ago. When I left corporate America in the mid-1990’s to pursue real estate full time, it was the best career move I have ever made! It has given me financial freedom. Do you want to be free? Real estate can give you Future Financial Freedom (FX3) too!
This book will share my secrets and strategies of Sandwich Lease Options with you. I suggest you try them all and decide what works best for your personal style and your specific area of the country. As you find your niche, you will perfect it. Real estate investing changed my life and it can change yours too. May lease options and zero down strategies change the way you think and help you live out your dreams so that you may have all the choices and freedom you desire!
Wendy Patton
P.S.: Please drop by http://www.facebook.com/wendypatton and leave a few words about your thoughts on this book.
CHAPTER 1
How Sandwich Lease Options Work to Get You to Future Financial Freedom (FX3)
What are Lease Options?
Lease Options are a way to purchase real estate, usually with very little or no money down, sometimes even with money back in the investor’s pocket. Sound too good to be true? Well, it isn’t. Can an investor end up with money in their pocket and not have to put 10 to 20 percent down to purchase real estate? Yes. These techniques are commonly used today by hugely successful investors. This book is going to show you how you can find sellers and homes you can purchase with little or no money down – truly the fastest way to Future Financial Freedom (FX3).
A lease option is a strategy that gives an investor the right to lease a home and also the right to purchase the home during or before the end of the lease period. An option is a contract that gives its purchaser the right to exercise a privilege. In the case of real estate investing, it gives the investor the right to purchase property during a contracted period of time. It is a technique that involves gaining control of a property, without the added burdens of ownership. All money made in real estate is made by controlling property. Owning property is the most obvious way to control it, but control is possible without ownership – and control is what makes the money. It was a dying John D. Rockefeller who told all of us his secret to achieving great wealth, “Control everything, own nothing.” All of today’s most successful real estate developers utilize options.
It is important to be aware that there are some risks involved with this technique, but I will cover these risks later on to help you minimize your exposure. The rewards that can come with lease options truly far outweigh the risks, so long as you keep aware of all that is involved. All real estate investing involves some level of risk. Lease options, because of how they are done, are truly the safest way to invest (in my opinion). Real estate investing is truly the quickest and best way to build lasting wealth. Many of the world’s wealthiest people acquire much of their wealth through investing in real estate and also using options.
While sandwich lease options can build you tremendous wealth, they usually shouldn’t be considered a short-term investing strategy. I define a short-term strategy as one in which the time that passes from the start of the transaction to completion (cashing out) is less than one year. A classic example of this would be a rehabbing project (fixing up a house and reselling it). The other side of the spectrum would be a longer-term strategy, such as buying a rental property and renting it over many years. I consider sandwich lease options to be in the center of that spectrum, usually requiring one to three years for the best payoff. However, you can always immediately sell the deal to another individual or investor for a profit; this is what is called in the business wholesaling or cooperative lease options (more on my website about these techniques). This can be done if you buy the property at a low enough price that you can turn a profit by selling the deal to another investor at a discounted price.
Visualize This Scenario
In every seminar I teach, I ask the students, “Who of you would be willing to purchase a home valued at $200,000 for $100,000.” Of course all hands shoot up. Then I continue by asking if they would still be willing to purchase the same home if the price was $150,000. Most of the hands stay up. I proceed upwards with the price increasing the increments by $10,000 each time. I always watch with amazement as the hands slowly but surely drop. At the price of $180,000 almost all hands are down. The point I am trying to make to each of them is that most investors are not willing to pay this close to retail price for a home.
I then re-pose the question to them: “How many of you would be willing to pay $180,000 for a $200,000