finance against an L/O property

Hi Willi,

I am in the process of evaluating the virtues of lease option sandwich’s. The only challenge I have is figuring out why someone would give me control of their property for say 2 years if the reason they had was to sell the house immediately without attracting agent fees and retain max equity.

However, they would need to vacate the premises, would they be able to obtain finance for their new home using this property as part of the finance approval given they haven’t received the equity they might have in the initial property as yet?

The goal of sandwich L/O being to create a win / win for everyone. Seller is able to upgrade to a better property, T/B has the opportunity to get into a home sooner, investor receives the benefits of investment.

Hope I am making sense.

Hi willi,

Thanks for your imput.

With a sandwich L/O trade (please anyone correct me if I’m wrong) there is the seller who owns the title of the property, the buyer who wants to own the title but can’t obtain finance for what ever reason and the investor in the middle profiting from bringing the two together and eventually moving the property from seller to buyer.

I understand the concept of controlling the property with options. I have no problem with the T/B reasons for being in the arrangement and also the investors – the reasons are the same as for wrapping.

One of the benefits being promoted for a seller to enter into such an arrangement is the ability to sell their home quickly.

I can’t see how this is a benefit if they cannot use whatever equity they might have in the property towards the purchase of the next home if it is tied up for the term of the option contract?

I can see it as being a benefit if the banks will accept the use of that equity as part of their new home finance even though it is not realised.

So, will a bank finance the sellers new loan using the optioned property as part of the equation?

NB:

– The seller retains the title to the property during the course of the option contract.

– All liabilities of the property being leased are assumed by the investor who in turn subleases the property to recoupe these costs plus profit.

Thanks Terryw for the input.

I thought this was the case.

As with any business you need to understand the thinking of your customers in order to service them effecively. I think what is attracting me to L/O sandwich investing is the ability to solve alot of peoples problems and profit from doing a good deed.

So with sandwich L/O trades who is your effective market on the sellers side of the deal and what are their reasons / benefits from participating in a L/O arrangement?

Also, do you have any idea how big this market may be?