Posted by Chris- WFL on August 28, 2006 at 13:09:43:
Don
Thanks for the reply.
That sums up pretty much what I had thought. I have an offer coming tonight and sounds like it might be a pass. I don’t think a 20k option is worth waiting a year or two for a few 100k. If I am going to wait I will take whatever appreciation I can get.
Unfortunately for the buyer I am not a motivated seller. THe home is direct waterfront and the longer I hold the better off I will be. Lots of development all around . . . they are still bulldozing everything to put up 2-3 million dollar waterfront homes.
I was just wondering…Can you make money by lease optioning a property, then assigning (selling) the lease option to someone else. I would like to do this almost as a “flip”. I would first find people who are looking for a home but can’t afford the down payment, then go out and find a suitable property, gain control with a lease option, then immediately sell the option to the new tenant/buyer. Are there any pitfalls to this, and exactly how could I profit. Any suggestions would be helpful.
Myself I would concentrate on getting the home first. I have found finding the Tenant/Buyer to be the easier of the two sides of the transaction.
I am not too sure on this but some folks have said that finding your T/B first and then going to find a house to assign to them is really close to borderlining a broker. Of course I am not an attorney and am not giving any legal advice.
Just because of the inherant ntaure of the assignment to look like you are playing broker, and the fact that finding the T/B is the easy part…I chose to find the home first and then find my assignee.
Go to the Success Stories page, read “Perseverance Payoff $8000” and that will show you how I did my first assignment. I just did another one about a month and a half ago just like it only about double the value.
Yes you can do this if your l/o agreement allows you to assign. You make your profit from the fee you charge your tenant/buyer to buy your contract. If you do assign your contract then be sure you get a signed release of liability from the original seller. Otherwise if the person you assigned to was to default you can be held liable for the difference. Just assigning your contract doesn’t automatically release you from liability.
Yes you can make money doing this. Just make sure you have the right of assignment in your contract with the seller. If you get the property for below market value, you can sell your option for a profit, while still giving the buyer a great deal.
thanx Rik and Johnboy…i appreciate it. But if I charge them for the lease/option, does that money then HAVE to come off the price of the house, and if so, doesn’t that offset any option consideration that I put against the option? I’m just trying to figure out how to structure this. If you have the time, it would be helpful if you could type out a quick example. Again…thanx for your input, guys. Dan
You enter into a l/o agreement to lease a house for $1000 a month for 3 years and you have an option to buy the house for $100k. If you put up any option consideration then you will need to charge the person your assigning to more money than what you put up to make a profit. Your not charging your buyer an option fee. Your just assigning them your contract. They will pay you x number of dollars and assume your contract according to the terms of that contract.
If you put up $1000 as option consideration and your option price was set at $100k, then you would need to come up with $99k to exercise your option.
You instead turn around and assign your contract for $5k. You get your $1000 back plus a $4k profit. The person you assigned to takes over your contract by paying the $1000 a month in rent and has to come up with $99k to exercise the option the same as you would have had to do. They’re simply taking over your contract under the same terms you had. The only difference is they PAID you a fee to get your contract.