Sandwich lease options are so simple to do that the process can be broken down into a few steps. Depending on exactly how you count the tasks, it can be ten or fewer steps. Each of these can be spaced over several days and multiple steps can easily be accomplished in a few hours on a single day. That means even a ten-step process can be accomplished in a few hours spread over four or five days. It’s very common for you to deposit your first paycheck in less than a week.
Options are a Real Estate Investor’s Best Friend
This blog covers the step about doing the paperwork to approve a tenant-buyer for a sandwich lease option but let’s begin with a thorough understanding of why options are an investor’s best friend.
Any option is a contract giving its purchaser the right to exercise a privilege. In the case of real estate investing, it gives the investor (you) the right to purchase property during a contracted period of time. This is how you gain control of a property, without the added burdens of ownership.
All the money made in real estate is made by controlling property. Ownership just adds burdens and responsibilities.
The sandwich option isn’t a get-rich-quick scheme. Done right, it starts putting money in your pocket right away, but it usually requires one to three years for the full payoff. The sandwich lease option begins with a decent payday of several thousand dollars that the tenant-buyer pays to the investor (you) as the option fee. This is the money you collect in as little as a week or less. Then the sandwich lease option generates a modest income stream for you of a few hundred dollars each and every month that leads up to a big payday of tens of thousands of dollars between one and three years down the road.
Your Future Financial Freedom (F X 3) happens when you put one, two, or three of these deals in your financial pipeline each month.
Approving a Tenant-Buyer for the Sandwich Lease Option
You collect your first paycheck when you approve the tenant-buyer and the paperwork is signed. My basic contract is ready for you to fill-in-the-blanks with the particulars for your deal. This is the basic checklist you follow:
Collect application fee (covers background check and other incidentals).
Review and verify the completed application (you require information on each applicant over the age of eighteen).
Confirm applicant meets your criteria, if not, send a rejection letter (a rejection notice is required by law whenever someone applying for credit or a place to live is rejected).
Complete the fill-in-the-blank contracts.
Sign the contracts (these must be signed before they move in).
Collect the non-refundable option fee (your 1st big payday) and any refundable rent deposit (the refundable rent deposit is separate from the non-refundable option fee).
Create an approved sandwich lease option folder on the tenant-buyer.
Videotape the home or take pictures (include tenant if possible). Say things on the video like “Marie, what do you think about the kitchen cabinets?”
Complete and sign check-in/out list.
Sign the lead-based paint form
Sign the seller’s disclosure. If this is the first time that you rented the home you may not know much about the home and you can write on the seller’s disclosure that you have never lived in the home and the buyer should do their own inspection, and the home is being sold “AS IS.” However, I would also recommend that you attach the previous seller’s disclosure to it (a copy) and have them initial it.
Confirm utilities are in the tenant-buyer’s name.
Confirm check-in/out form returned.
Remove sign and lockbox.
Make a copy of the tenant’s check for the tenant-buyer file.
Issue the key to the tenant-buyer.
How easy is that to collect several thousand dollars as soon as you get started as a sandwich lease option investor?
Keep track of the paperwork because it’s all to protect you. Think of “pro-seller” as also meaning, “protect seller.” That’s pro-YOU!
Now you sit back and collect the monthly rent checks while the tenant-buyer repairs their credit. They are highly motivated to make this happen, but you’ll want to check in with them periodically to make sure everything is on track.
Closing – Your BIG Sandwich Lease Option Payday!
If you have been working with your tenant-buyer from the beginning and keeping them in touch with the mortgage broker, you will know when they are ready to purchase the home. They are finally ready to close. If they want to use a mortgage broker of their own choosing, that’s fine. Just find out who it is and keep in touch with them, so that you will know where they stand on getting their mortgage completed.
Although the sandwich lease option paperwork was signed many months earlier, occasionally the mortgage lender wants you to change something on the contracts to get the mortgage approved. For example, the buyer may need more money for closing costs, so the lender may ask if you are willing to pay for some closing costs if you increase the price of the home by the same amount. I am always willing to do this, as long as the home can appraise for the new amount.
All of these little tidbits of knowledge, that come with experience, are included in the material.
A simultaneous or double closing is when there are two closings on the same home at the same time or the same day. It is sold and bought the same day. It used to be that we, as the investor, didn’t need to bring money to the closing table, but now that is no longer possible in any state. You must have the funds to buy before you can sell. You can get funds for a twenty-four to forty-eight hour time period. This is called transactional funding. It will cost you a couple of percentage points, but it will get the deal closed for you. This is one way to handle the closing.
Another way is to get the seller to sell directly to the buyer and you put a consulting or commission fee in the closing paperwork for the amount of your profit. This saves everyone money and time.
Find out when the buyer is going to close and keep in communication with the seller about it. Go back and forth until you finally get it down to the exact day and the exact hour. You should be the coordinator, not anyone else. It’s to your benefit to make sure all the pieces are in place.
Every Real Estate Investor Needs the Sandwich Lease Option in Their Toolbox!
Here’s everything you need to avoid mistakes (sometimes costly) when doing sandwich lease options!
- Investing In Real Estate with Lease Options.
- Advanced strategies for Buying and Selling with Lease Options.
- You’re Wealth Building Arsenal.
- Add Personalized Coaching.
- Working with Realtors
- Limited start using Cooperative Lease Options.
- Expand to Get the Deed “Subject To.”
By Wendy Patton
For more than 30 years, I’ve used the Sandwich Lease Option System to earn myself and my students millions of dollars. From my experience, I know there is plenty of room and opportunity in the real estate investment market for everyone wanting to participate to find profitable deals. It’s because of that fact and my personal success that I share the Sandwich Lease Option System with others.
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