Arrgh! - Sandwich L/O - Posted by Frank

Posted by Ed Copp (OH) on March 01, 2000 at 13:02:46:

It sounds like you have come up against a graduate of the school of the greater fool theory. If you deal with this extremely greedy person you will probably be the looser. You don’t need to explain costs to him, he already knows all this. How much does a one month vacancy cost? If it were me, I would just walk away. This person id not motivated, at all…ED

Arrgh! - Sandwich L/O - Posted by Frank

Posted by Frank on March 01, 2000 at 10:57:11:

I screwed up - help me out here. I talked to a seller last night who was offering his property as a Lease Option - $950. I know the FMV rent for the place would be $950 but also knew that I could L/O it for more than that and hence complete a sandwich deal.

However, when I informed the seller that I was an investor and would be subleasing out the place his response was “Oh, I must not be asking a high enough price if you think you can sublease this to a tenant and still make a profit”. Hence, he raised the L/O price to $1100. Arrgh! I was thinking about this after the call and I guess he had a point. I mean, isn’t a sandwich lease option really an opportunity for an investor to take advantage of a seller offering a L/O for less than he should be? I understand about the win/win situation we as investors try to strive for. But if the seller doesn’t leave any profit for an investor in the L/O, there can be no sandwich deal. Right? If he asked $1100 at the start I would have passed.

Any advice would be appreciated.

Re: Arrgh! - Sandwich L/O - Posted by Redline

Posted by Redline on March 01, 2000 at 15:17:23:

Further to what these guys said … which is all good advice …

I’ve often heard the “big boys” around here (I think Kaiser in particular) say something like: You’re looking for people that haven’t figured out the game yet! This guy is advertising a lease/option, so you know right away he’s not “your average joe”. You should be looking for people that are listed “For Rent” or “For Sale” and that are motivated and open to your suggestions. Then a L/O on your part might work. A guy already looking for a L/O may not be your man.

Don’t fret - keep on looking.

Good luck and keep us posted,

Re: Arrgh! - Sandwich L/O - Posted by Bill K. - FL

Posted by Bill K. - FL on March 01, 2000 at 15:01:49:

Hi Frank,
Well, live and learn. Next time just focus on the sellers problems and how you can solve them. Don’t talk about your profit. Is he moving out of town? Tell him about the horrors of being a long distance landlord and how you will find the buyer for his house he can’t and guarantee his payments and maintainence.

Re: Arrgh! - Sandwich L/O - Posted by Chris

Posted by Chris on March 01, 2000 at 12:32:14:


You may have let the seller in on too much of your gameplan. In the future don’t make your side of the deal sound so sweet that you will get people like the seller salivating over a deal that did not look so great to him before. I mean why didn’t he think of your idea first?

Mention that all of the normal problems of a landlord will be removed for him-YOU NOT HIM take care of the tenants, YOU NOT HIM takes care of the maintenance, etc. Does he want to be a landlord or does he want his problems solved?

This guy sounds like he needs to be a little more motivated so you nay want to just leave him your offer and contact him again soon-maybe slip in that you have looked over the figures again and that your $1100 projected rent was for another property that you were looking at(something to place doubt in his mind about that figure being valid for his property).

Next time make sure that your L/O agreement with the seller gives you the right to sublease without the seller’s permission to a qualified tanant. He does not need to know your profit level. If he asks, state it in a way that you will hopefully make enough without reaching into your pocket to cover maintenance(although you know different) until you can purchase the property with a follow up that this is a long term investment for you-not an instant payday.

There are other sellers out there who are motivated.

-Good Luck, Chris

Where is his motivation - Posted by Bud Branstetter

Posted by Bud Branstetter on March 01, 2000 at 11:06:35:

Next, because you are an investor, he will want 5K option consideration. Either monthly cash flow, excess option over what you pay, or a higher price are your sources of profit. If you give up one you have to be sure the others will make up for it. Give up a second one and the third had better be really sweet. You can solve his problem if he has some motivation but his greed is overcoming that. You can emphasize the maintenance, the tenant screening you do, and the reliability of your payment. If he is not interested in a win win situation all you can do is wait until he has some more motivation.