How To Structure A Lease Option Deal | Case Study
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- Опубликовано: 5 сен 2024
- Want to learn how to structure a lease option deal? In this video, I'll walk you through a case study of how I structured a lease option deal with will make me $94,000 over the next few years.
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#howtostructurealeaseoption #FlippingHouses #HowToFlipAHouse #FlippingHousesForBeginners #leasepurchase #LeaseOption #lease #jamelgibbs
This was an interesting deal that I wanted to share with you. I also wanted to show you that there's more to profiting in real estate than what you see on the flip shows. What was your biggest take away from this video? Also, what's better in your eyes, "Cash Now" or Cash Flow"?
So the seller had no idea it would take two weeks to put an ad on Craigslist to find a buyer to spend $70K on a house that needed $20K in repairs???
The seller was motivated to sell. They don't know how, nor do they want to market the house. This takes some specialized knowledge that an investor can provide. Also, the seller did not have the repair money, and just wanted to get rid of the house.
I like both... this video was inspiring to say the least. simple yet powerful applied actionable knowledge. I'm grateful to have came across this video. Well done!
🙏🏾🙏🏾🙏🏾
I’ve got a property that’ll be vacant in a few weeks I need more on how this’ll work out.
I really like lease options because you help the homeowner and you help people become homeowners. Great strategy
Indeed
So true!
Excellent video! I’ve done several deals exactly like this and it is win-win for everyone!
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You broke my brain with that one...... That profit spread is amazing.
LOLOL
Mind blown 🤯, thanks for the breakdown an advice !
🙏🏾🙏🏾
Whoa!! Cash flow is truly king. Like it or not Jamel Gibbs you are my mentor. I'm almost ready for the massive action!!
🙏🏾💪🏾👍🏾
Now that's what's up
Explained greatly because I always wondered when folks say the spread goes to their back pocket.. how to they calculate that to the payout amount
Not sure what you mean. The spread would be the difference between what's owed on the mortgage, and the price you sell the property for. Hope that helps.
@@jamelgibbs I think they mean the spread of the mortgage payment required vs the amount you're receiving from the tenant/owner.
Regarding how they calculate to the payout amount is done through a mortgage calculator that allows for 'extra payment' option per month for the accelerated payoff date.
What I'm curious about is on a lease option on the seller side (you renting-to-own to your tenant/owner), do you keep title of the property during their entire contract, or do you sign the deed over to them with a foreclosure clause in your purchase contract? Also, do you have to record all of those documents to the county clerk?
That was a great explanation and helped immensely! Thank you!
4:51 BOOM! Letssss goooooo!
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Learned a lot from the video although I'm on a different mentality when it comes to holding property. There is no rebounding from the next crash so I'm making as much as I can in the present tense.
Awesome video as usual! The information that you're giving is gold ✨️ Iooking into your course. Thank you so much Jamel!🙌🏾💯
Check out the course at get.reieducationacademy.com
can you explain the timeline?
you initially got the owner to agree to a lease option, then how long did it take to find your buyer / tenant?
how did you find your tenant? did you market the property for rent? does the tenant have the choice to buy?
Impressive! So you found a tenant-buyer who could afford 20%+ down payment plus $20k in repairs. Doesn't sound easy to find such a person.
It’s all in the approach.
Thank Bro for a great video with good clarity. I'm subscribed
Thx for the sub. 💪🏾
Hi I’m a little confused. So you take over the mortgage with a purchase of sale agreement like with wholesaling? Also, did you have to close and pay closing costs? I’m just confused about the process of the house becoming yours, you paying that $5,500 and then selling it. When did you acquire the title? Sorry I know this was a lot to ask; just trying to understand as its something I’d like to do
With this type of lease purchase you are renting the property from the owner via a sandwich lease option. There are no closing costs until you exercise your option.
Watched video...loved the content... subscribed...and of course... cracked that bell!!
Appreciate that.
if you were going to hire a real estate agent to sell your property "rent to buy" how much would you pay him? Or what would the costs typically be?
Great strategy. Why not pay down on the principal every month, which reduces your overall mortgage every month, instead of doubling up on the mortgage? You can save on the interest that's paid.
The extra payment is principal only. I should have clarified that in the video... it’s actually a triple payment on the principal every month.
Oh...so you paid 1248/mo not 832??? That might make a difference. But where did the extra 248 come from?
@@jamelgibbs Simple math!!! Yet did I miss the repair costs of $20k? $15k - $5500 = $9500. Repairs of $20k ???
Tenant takes care of that.
@@gocory4975 Triple payment is applied or paid only to the principal, which is much less than $416, which is principal, interest, taxes and insurance (PITI). I forget how much @Jamel Gibbs said is the principal payment by itself. I believe it was shown in an earlier answer from Jamel.
Hey Jamel, how are you brother? Quick question, can I have instructions on how to structure a true rent to own like this particular deal? I appreciate it. Thanks
I love and appreciate this strategy. So was the home owner in a preforeclosure status?
Yes
Great video Jamel I really appreciate this information. For me right now I think "Cash Now" is better in order to get to the cash flow for long term wealth building but ultimately "Cash Flow" is king. How did you market to find the lease option buyer?
Great question. A lot of it is done through Craigslist and other wholesalers.
Thanks for your continued support.
That’s smart as hell bruh 😂😂😂
Hi Jamel, how are you able to market and receive the up front payment from the buyer when you have a rent to own and you don’t fully own the property?
Great video as always, thanks for share it Jamel 👍🏼
Thanks brother
Super dope deal!!
Yessir
Awesome content. Thank you brother.
Thx
Wow!!!! that was advance thinking in your strategy.
Appreciate that!
Thanks Jamel....Great info and video. How do you find these motivated sellers? Also, what real estate course/training do you recommend for starters??? Thanks brother!
I find them by focusing on motivating seller marketing. Check out my real estate investing playlist. I share it all there. As for courses, I'm biased. I've never gone through anyone's course. I have my own. ;-)
Sounds like a great deal structure but would love to see this penciled out.
Is the 50,000 the amount including interest?
If you are paying seller 1000/mo would that take about 50 months or just over 4 yrs?
If you're getting 1000/mo for 7 years that gives us 7×12×1000=84000
But you are paying 55,500-so isn't the profit 34,500+9500 upfront= $43,000
Or are you looking at 584 cashflow for 50 months yielding 29,200+ 1000 for 34 months yielding another 34,000 which leaves a cashflow total of 63,200 + the original 9500 ip front bringing you to 72,500? Still missing something? Help.
Hey, way to be on it. Here are the numbers...
Sales price $50,000 with a payment amount of $416.56 per mo PITI. Actual principal and interest is $206.08.
Tenant pays $1000 per month. We pay $828.72 per mo (triple principal only payments). We've already paid off close to $10,000, but as the mortgage amount decreases, there will be more principal being applied toward the mortgage than interest.
By paying the extra $412.16 every month, it knocks off 28 years and 6 months (342 payments) off of the loan.
We've verified these numbers with a mortgage calculator. You can see a screen shot here: bit.ly/31xLfK9
Deal numbers $9500 upfront...
$4,128 over 2 years ($172 per mo for 24 months) $1000- $828 per mo
Close to $84K over 7 additional years
That's how we'll pay this off by summer of 2021. We're not perfect, but this is what the numbers are telling us -).
Hope that clears it up for you.
Okay, I tried it with 1248 for 40mos.
Even pulling 38 payments from the 9500.
That's 3 years and 4 months to pay off 50k
Then the remaining 44 months at 1000/mo would yield 44,000 minus the roughly 500 (or 248 x2 you need to pay out as 40-38=2 payments lacking) So, it seems the profit is 43,504 over 7 years, right?
Hey, way to be on it. Here are the numbers...
Sales price $50,000 with a payment amount of $416.56 per mo PITI. Actual principal and interest is $206.08.
Tenant pays $1000 per month. We pay $828.72 per mo (triple principal only payments). We've already paid off close to $10,000, but as the mortgage amount decreases, there will be more principal being applied toward the mortgage than interest.
By paying the extra $412.16 every month, it knocks off 28 years and 6 months (342 payments) off of the loan.
We've verified these numbers with a mortgage calculator. You can see a screen shot here: bit.ly/31xLfK9
Deal numbers $9500 upfront...
$4,128 over 2 years ($172 per mo for 24 months) $1000- $828 per mo
Close to $84K over 7 additional years
That's how we'll pay this off by summer of 2021. We're not perfect, but this is what the numbers are telling us -).
Hope that clears it up for you.
It would be an additional 7 years after the house is paid off as well. Not 7 years total.
Are you using a different contract agreement and do I talk to the bank or will the closing attorney talk to the bank and pursue terms of the contract agreement?
You negotiate this type of deal with the seller.
Did you give the seller any cash? And did the buyer purchase the house as is no repairs?
What's the difference between a subject 2 and a lease option?
Great question. 2 different exit strategies. I’ll be doing a video on subject to soon. Stay tuned.
Basically, a lease option is renting a property with an option to buy it within a certain amount of time.
Subject to is taking over the owner’s payments on the property. You also get the deed while the note stays in the seller’s name.
@@jamelgibbs thank you
You’re welcome
Sub2 is the seller deeded over the property to you .. so you have ownership w/o the loan being in your name. It’s really an advance strategy because you have a moral obligation to the seller to make sure the loan is paid. Plus there are other moving parts that should be in place. It’s 1 of my favs to do
Isn’t that known as subleasing?
Sandwich lease
I WAS HAVE A TOUCH TIME WRAPPING MY HEAD AROUND WHAT God didn't do for me, until I seen just 3 of your videos on how to get paid with no money as we say it broke in the hood and that on Neighborhood!
Jamel if a buyer puts an option fee down of 20k, and my purchase price with the seller is 130k & my buyers purchase price is 150k. If buyer executes that option do I get no money on the back end?
Depends on how you structure the deal.
What about the 20k repair cost? And the $1000 is only after you pay mortgage for 2plus years!
Tenant takes care of the repair cost. And the $1000 is the rent amount.
Can I list the property for Section 8?
If you were planning on keeping long term... yes.
Do you have to make payments until you find a end buyer with lease options. Or the seller gives you time to market until you find buyer
Would like to know this as well.
I just signed a 100k mortgage with this same situation, can you help me sir to pull this off
So after you structure a lease option and get it agree on... where do you send the lease option agreement? NOBODY ever says this...
You put it in your file cabinet.
@@jamelgibbs you don't have to file it nowhere or anything?
nope
@@jamelgibbs thanks for the info
anytime!
Who fixed the home
pretty cool
Thx
The tenant buyer watching this like:
👁👄👁
Lol
So is this a sandwich lease option?
Yes
What about the $20k to repair the property?
The tenant buyer takes care of that.
@@jamelgibbs So, some fool paid $90,000 for a $70,000K house?
The buyer didn't want to go to the bank for a loan. If they would've gone to the bank they would've paid 4 times that amount over a 30 year period when you include interest. They are actually saving money.
Own nothing, CONTROL EVERYTHING!
Yessir
I like the idea but his math is very flawed
Renter paying 1k a month, $1k x 30 months is 30k and you owe the bank 50k. You also say something about $830 / month you are dishing out toward the payment which would put you at -$250 cashflow. So if you were to pay $830 a month to the bank you would be negative cash flow for 4 years to pay it off. Lmk if I’m missing something. I’m not trying to be a jerk, I’m just getting into this stuff myself and trying to figure out roi and how to go about things. No hate
Also you wouldn’t be making $1k a month for 7 years. You want the renter to own the house in 7 years, so at zero cash flow it would take you 50 months to pay off the original loan. This would leave you with 34 months of profit after over 4 years of making nothing. So after 7 years you would “profit” 34k
Hey. Thanks for the comment. I didn’t take it as hate. Not that sensitive lol. I’m more interested in seeing if I missed something.
I do tons of these deals and my numbers are usually pretty accurate. But I’m definitely not perfect and make mistakes even after 20 yrs in the business.
When we did this deal, it wasn’t on a 30 year mortgage, it was on a 40 year. We found that out afterward.
When we amortized everything back then, it would’ve taken 30 months to pay everything off on double payments.
Today, we still control this deal and have a little left to go on the mortgage.
Once we are free and clear the monthly cash flow will increase to $1000 per mo.
So with $9500 upfront
$1000 per month for 7 yrs
We’re hitting our numbers. Make sense?