I am trying to do some lease options deals, but having difficulty setting up a sandwich lease option because of some complications with local laws and sellers are not really comfortable with me in the middle of the deal, plus I don’t want to be liable to pay for rent during vacancy.
I have decided to do only lease option assignments for now but I am not sure about the assignment fee part.
From what I have found out, assignment fee should be around 3% or $5000, whichever is higher.
So the tenant/buyer will pay an option down payment and then pay me the separate assignment fee.
If you assign the lease option, you run the risk of being sued by the seller and the buyer. If the buyer makes payments but the seller fails to make the underlying loan payment the house goes in to foreclosure. Who’s fault was it — the buyers will blame you.
If the buyers stop making payments and trash the house. Who’s fault is it.. the sellers will blame you.
I know many people who have been stuck in this situation. Sure you can try to protect yourself with language in the assignment contract that the seller and the buyer will not hold you liable. But if anything goes wrong, they will still come after you.
You’ve got two choices:
1. Get better at negotiating so you can get the seller to do a lease option with you. Stay in the middle to protect the seller and the buyer…. and YOU!
Or, A much BETTER approach would be:
1. For cash – do wholesaling.
2. For cash flow – do Master Leases. After you have proven to the owner that you will make payments on time, you can discuss getting an option. But the option is not necessary. You really don’t want the cash flow gravy train to stop.
3. Look for houses you can buy subject-to or with seller financing that you can keep as rentals to increase your cash flow and your equity.