Sandwich lease vs co-op assign

[randian 0]

It is not that the seller is receiving less in an SLO. They are receiving what they need.

Did I miss something here? A SLO gives up a portion of the cash flow, which a CA doesn't. A SLO gives up additional back-end profit, which a CA doesn't. What sort of magic leaves the seller just as much cash with a SLO as a CA?

[Jason (AL) 1]

I agree there are a lot of IF'S. Investing through SLO's has advantages. When CA's are slow they can be handy as what Steve stated. Im more in agreement with Johnathan. There must be enough profit upfront, and you cant rely on the back to save you. That was my mistake. You really cant rely on the Option money either. UNLESS its a nice home in a good area and your cashflow is a 35-40% of the negotiated rent your not investing your wasting your time.

 

And you can't always rely on cash flow either.

What about vacancies? Isn't that one of the reasons to go with a CA vs. a SLO? ...not enough profit per month and/or on the back end?

Never mind a seller's motivation and greed to keep the majority of the profits (if there's any to be had). On the other hand, I wouldn't

mind breaking even for 12 months if I knew I was getting a good-sized back end profit as a result of the T/B cashing me & the seller out.

But like it has been said, you cannot totally rely on this 100% of the time...it's all merely on paper until the checks are cashed. That's why I believe

in profiting while you can. If it's a "terms deal" (SLO...owner financed), then get as much possible up front and be ruthless when it's time to be

paid month in and month out. If you don't like SLOs, then stick to CAs. If you want more potential profit, then do SLOs. They each have their pros & cons.

But, also, don't force any particular method of investing on each and every deal. Like Rex has stated here before, CAs and SLOs are just tools.

 

I don't see it as 1 particular branch of lease options (CAs in this case) vs. another (SLOs).

Rather, it's "How can I structure a profitable win/win/win deal with the numbers presented, coupled with the seller's motivation?"

Asking this should determine which type of deal you do.

[<Steve> 82]

Well said Mr. J

[Jonathan RexfordFL 8]

I agree there are a lot of IF'S. Investing through SLO's has advantages. When CA's are slow they can be handy as what Steve stated. Im more in agreement with Johnathan. There must be enough profit upfront, and you cant rely on the back to save you. That was my mistake. You really cant rely on the Option money either. UNLESS its a nice home in a good area and your cashflow is a 35-40% of the negotiated rent your not investing your wasting your time.

 

And you can't always rely on cash flow either.

What about vacancies? Isn't that one of the reasons to go with a CA vs. a SLO? ...not enough profit per month and/or on the back end?

Never mind a seller's motivation and greed to keep the majority of the profits (if there's any to be had). On the other hand, I wouldn't

mind breaking even for 12 months if I knew I was getting a good-sized back end profit as a result of the T/B cashing me & the seller out.

But like it has been said, you cannot totally rely on this 100% of the time...it's all merely on paper until the checks are cashed. That's why I believe

in profiting while you can. If it's a "terms deal" (SLO...owner financed), then get as much possible up front and be ruthless when it's time to be

paid month in and month out. If you don't like SLOs, then stick to CAs. If you want more potential profit, then do SLOs. They each have their pros & cons.

But, also, don't force any particular method of investing on each and every deal. Like Rex has stated here before, CAs and SLOs are just tools.

 

I don't see it as 1 particular branch of lease options (CAs in this case) vs. another (SLOs).

Rather, it's "How can I structure a profitable win/win/win deal with the numbers presented, coupled with the seller's motivation?"

Asking this should determine which type of deal you do.

 

YEP...that is why people need to make a business decision based on their cashflow needs. It is all about the risks. I have been rethinking my cashflow needs and I may raise my comfort level to the 55% range instead of 50%. We are seeing a lot more defaults on vacancies and higher maintenance issues. Today I was at the courthouse getting a few names of NOD's and went to auction. I seen a home that would rent for 800 per month. Some of the cashflow investors there would not bid higher than 25K. Again it is about RISK.

[<Steve> 82]

I understand what you are saying JR but if I had to find SLOs with a 50% rent cash flow or 50% equity, I would never find a deal. If I would buy stocks in the stock market trying to find a 50% return it would never happen. Or, if I would go to the bank to take out a mortgage, use my own cash as a down payment and buy a rental property for the long term that is even more risky.

 

But what do you have in a SLO? No banks, No cash and No credit. Where's the risk? It's really not even an investment as I have nothing in it, nothing to lose. Really it is just a real estate transaction. If the worry is about a vacancy, you can save the option consideration. Do some CA deals and build up a cash reserve. Don't promise the seller you will make the payments when the property is vacant. Use an exit strategy where you can cancel the agreement with the seller anytime during the lease term. Do deals with sellers and tenant/buyers that you have built a good repore with. It's my business and I can decide who I work with and who I don't work with.

"A SLO properly structured can be quick to complete, stress free to maintain, and most profitable for the investor"

[Doug Pretorius (ON) 9]

I understand what you are saying JR but if I had to find SLOs with a 50% rent cash flow or 50% equity, I would never find a deal. If I would buy stocks in the stock market trying to find a 50% return it would never happen. Or, if I would go to the bank to take out a mortgage, use my own cash as a down payment and buy a rental property for the long term that is even more risky.

 

But what do you have in a SLO? No banks, No cash and No credit. Where's the risk? It's really not even an investment as I have nothing in it, nothing to lose. Really it is just a real estate transaction. If the worry is about a vacancy, you can save the option consideration. Do some CA deals and build up a cash reserve. Don't promise the seller you will make the payments when the property is vacant. Use an exit strategy where you can cancel the agreement with the seller anytime during the lease term. Do deals with sellers and tenant/buyers that you have built a good repore with. It's my business and I can decide who I work with and who I don't work with.

"A SLO properly structured can be quick to complete, stress free to maintain, and most profitable for the investor"

That's exactly what I've started doing right there. I mean really, who else is offering to guarantee the rent? Certainly not property managers. And if you're worried your T/B might trash the place you can pay a little extra and get malicious damage insurance. There aren't many pitfalls left in this business, we're as close as you can get to zero-risk investors.

[randian 0]

That's exactly what I've started doing right there. I mean really, who else is offering to guarantee the rent? Certainly not property managers.

True, but if you're not going to guarantee the rent, why would a property owner take JR's 50% of FMV rents deal over a licensed agent's 90%?

[<Steve> 82]

That's exactly what I've started doing right there. I mean really, who else is offering to guarantee the rent? Certainly not property managers.

True, but if you're not going to guarantee the rent, why would a property owner take JR's 50% of FMV rents deal over a licensed agent's 90%?

I think that is what Jonathan was saying. That if you can get 50% then the risk to reward may allow you to offer a guaranteed rent no matter what.

[Jonathan RexfordFL 8]

I understand what you are saying JR but if I had to find SLOs with a 50% rent cash flow or 50% equity, I would never find a deal. If I would buy stocks in the stock market trying to find a 50% return it would never happen. Or, if I would go to the bank to take out a mortgage, use my own cash as a down payment and buy a rental property for the long term that is even more risky.

 

But what do you have in a SLO? No banks, No cash and No credit. Where's the risk? It's really not even an investment as I have nothing in it, nothing to lose. Really it is just a real estate transaction. If the worry is about a vacancy, you can save the option consideration. Do some CA deals and build up a cash reserve. Don't promise the seller you will make the payments when the property is vacant. Use an exit strategy where you can cancel the agreement with the seller anytime during the lease term. Do deals with sellers and tenant/buyers that you have built a good repore with. It's my business and I can decide who I work with and who I don't work with.

"A SLO properly structured can be quick to complete, stress free to maintain, and most profitable for the investor"

 

 

There is a TON of risks with SLO. Just about everything you stated can have an opposite effect. A vacancy can bankrupt an investor. Option fees in my world are for business operations.

My intention was not to hijack the thread. I would rather have a solid business model instead of having a bunch of weasel clauses to get out of the deal when it starts to go south.

 

Sure finding SLO deals at a 50% level is hard. But it is not unheard of. If you find FREE and CLEAR property you can make those type of offers.

My reserves should not be used for making up vacancies, repairs and working evictions. My reserves are for going on vacations and so forth...lol.

That is why I have adopted the model that the property has to pay for itself.

[Jonathan RexfordFL 8]

That's exactly what I've started doing right there. I mean really, who else is offering to guarantee the rent? Certainly not property managers.

True, but if you're not going to guarantee the rent, why would a property owner take JR's 50% of FMV rents deal over a licensed agent's 90%?

I think that is what Jonathan was saying. That if you can get 50% then the risk to reward may allow you to offer a guaranteed rent no matter what.

 

I will guarantee the rent all day long at 50% that is what a TRUE SLO is. If you make an agreement to make the payments you better make the payments. But you better make sure it is a deal 1st. Anything higher than 50% is suicide.

[Doug Pretorius (ON) 9]

There is a TON of risks with SLO. Just about everything you stated can have an opposite effect. A vacancy can bankrupt an investor. Option fees in my world are for business operations.

My intention was not to hijack the thread. I would rather have a solid business model instead of having a bunch of weasel clauses to get out of the deal when it starts to go south.

 

Sure finding SLO deals at a 50% level is hard. But it is not unheard of. If you find FREE and CLEAR property you can make those type of offers.

My reserves should not be used for making up vacancies, repairs and working evictions. My reserves are for going on vacations and so forth...lol.

That is why I have adopted the model that the property has to pay for itself.

I wouldn't call it a weasel clause if the contract never stated that you would guarantee the rents in the first place. I've believed for a long time that property managers are pretty clever the way they have things set up. Monthly cash flow with zero liability. So that's all we're doing here.

[verbatim 1]

My intention was not to hijack the thread. I would rather have a solid business model instead of having a bunch of weasel clauses to get out of the deal when it starts to go south.

 

Hijack J.R. Hijack!!! LOL

 

I started it and you guys finish it! When I initially typed this I didn't know if the guys whose posts I look forward to reading would come out of the woodworks and you all did [with the exception of Adam King and a few others] and for that, i am thankful. Glad I could spark this great dialogue.

 

And I know return you to our regularly scheduled program...

[Jonathan RexfordFL 8]

There is a TON of risks with SLO. Just about everything you stated can have an opposite effect. A vacancy can bankrupt an investor. Option fees in my world are for business operations.

My intention was not to hijack the thread. I would rather have a solid business model instead of having a bunch of weasel clauses to get out of the deal when it starts to go south.

 

Sure finding SLO deals at a 50% level is hard. But it is not unheard of. If you find FREE and CLEAR property you can make those type of offers.

My reserves should not be used for making up vacancies, repairs and working evictions. My reserves are for going on vacations and so forth...lol.

That is why I have adopted the model that the property has to pay for itself.

I wouldn't call it a weasel clause if the contract never stated that you would guarantee the rents in the first place. I've believed for a long time that property managers are pretty clever the way they have things set up. Monthly cash flow with zero liability. So that's all we're doing here.

 

Then I will withdraw my response to Weasel Clause. I understand what you are saying. I just don't like property managers. Never have.

[<Steve> 82]

My intention was not to hijack the thread. I would rather have a solid business model instead of having a bunch of weasel clauses to get out of the deal when it starts to go south.

 

Hijack J.R. Hijack!!! LOL

 

I started it and you guys finish it! When I initially typed this I didn't know if the guys whose posts I look forward to reading would come out of the woodworks and you all did [with the exception of Adam King and a few others] and for that, i am thankful. Glad I could spark this great dialogue.

 

And I know return you to our regularly scheduled program...

See what you started verbatim.

 

There is a TON of risks with SLO. Just about everything you stated can have an opposite effect. A vacancy can bankrupt an investor. Option fees in my world are for business operations.

My intention was not to hijack the thread. I would rather have a solid business model instead of having a bunch of weasel clauses to get out of the deal when it starts to go south.

Vacancy can bankrupt an investor.

lol come on JR.

 

There is no weaseling when you are sitting with the seller at their kitchen table going over the agreements and disclose everything about how the deal works and the seller signs away in agreement.

 

"Keep The Promises You Make, And Don't Make Promises That You Can't Keep."

 

As an investment there is no risk because there is nothing invested. If you look at this as a business (business model) I can concur you have to work your SLOs as a business. There is no business I know of that doesn't lose profit from time to time or that has a slow month or quarter. With any business you need cash reserves set aside for those times. If you are using your reserves for vacations you are putting yourself at risk.

 

If you are starting with SLOs save ½ of the option consideration from each deal for a rainy day and use the second half for vacation. lol

 

And there is nothing wrong with not wanting to do SLOs, CAs are golden too!