Everybody should win with a sandwich lease option! Life isn’t always fair but that doesn’t mean we can’t work at making it as fair to each other as possible. That’s what sandwich lease options should be all about. There are three primary people in a sandwich lease option. A seller that needs a creative way to sell their house for some reason. A tenant-buyer that needs a creative way to buy a home for their own reason. And an investor that is often new to real estate and needs a low or no-cost way to get started.
The 3 people in a sandwich lease option should help each other!
The Typical People in a Sandwich Lease Option Deal
It’s called a “sandwich lease option” for a good reason. Having three people in the deal and the way the deal is structured are a lot like building a sandwich. The owner of the house is the bread on the bottom of the sandwich. The investor is the meat in the middle and the tenant-buyer is the top piece of bread.
The seller often has little equity in the house and/or needs cash fast. It’s usually that simple. It shouldn’t be a distressed house that needs to be fixed up or unloaded at a deep discount. The key is that the seller needs some help selling the house in a creative way. Often, it’s a cute white picket fence home with a nice backyard for a family with children. It could be the seller has two mortgages and very little equity. They need to sell but can’t afford to pay the real estate sale’s commission. Or it’s a vacant house that is not generating income to pay the mortgage and the seller needs cash fast or they will go under financially. You probably know someone right now that is in one of these common situations. You will also learn about other sellers in the course materials, including the person that inherits a house and wants to generate cash flow for themselves without being involved with the day-to-day hassles of being a landlord.
The bottom line is that these sellers need the type of help that a sandwich lease option investor provides.
The investor also has many reasons for wanting to be part of a sandwich lease option. The biggest motivator is a low or no-cost way to get into real estate investing without risk. Or it could be the investor has other real estate deals that won’t pay off for several months and they need to generate some income in the next few days or a week. The beauty of a sandwich lease option is it doesn’t have to cost the investor a single cent to put the deal together AND you can receive your first payday in a couple of days. You fill a key role because you function as both a tenant and a landlord by being the meat in the middle. You have the know-how and the paperwork needed to put together a deal. A deal that works for both the seller and the tenant-buyer. You have multiple ways to structure a sandwich lease option to help everyone. You can adjust the numbers so that a regular sandwich lease option is fair to all. And you know when the cooperative lease option lets the seller and tenant-buyer work closely together so that you can move on to your next deal.
As the investor, you are the meat in the middle making the deal fair for everyone involved!
The tenant-buyer is usually the most motived person in the sandwich lease option and the easiest to find. The common trait among tenant-buyers is that they are having trouble buying a home. It could be that they can qualify for a mortgage except they don’t have quite all the down payment saved yet. A sandwich lease option lets them live in the home they want to buy until they save the remainder of the down payment to close the deal. Others have been working diligently at repairing old credit score problems and will soon qualify for a mortgage. They also get to live in the home that they want to buy until the sale closes. It could even be someone that is willing to pay above the appraised value of the home and leasing it for a year or so will allow the appraised value to increase so that the house qualifies for a mortgage. Good tenant-buyers are not people that have lost all control of their finances. They are simply people having trouble buying a home in today’s tough real estate market. People that a sandwich lease option helps purchase that white picket fence home in a year or so.
The seller, investor, and tenant-buyer are one team helping each other with a sandwich lease option that works for all!
How a Typical Sandwich Lease Option is Often Structured
As the investor, you are paid in three ways – cash now, cash flow, and cash later. You will collect money in all three ways but knowing how to structure it gives you the flexibility to create any deal that is attractive to both the seller and tenant-buyer. You can afford to be flexible because you’re going to make money no matter how the deal is structured.
You write two lease options. One lease option is between you and the seller. The other lease option is between you and the tenant-buyer. That naturally builds more flexibility into the structure of the deal. In the deal with the seller, you agree to pay a specific amount for the lease option. This is cash now for the seller. The lease option fee that you pay gives you the exclusive right to buy the house for a specific amount and within a specific amount of time. You also agree with the seller on how much rent you will pay each month – this is cash flow to the seller. The other important part is how much you will pay to purchase the house before the end of your exclusive right to buy the house – this is cash later for the seller.
The essential parts of a sandwich lease option are Cash Now, Cash Flow, and Cash Later.
Next, you put together a very similar lease option with the tenant-buyer. As the investor your profit comes from the same three sources – cash now, cash flow, and cash later. You simply charge the tenant-buyer more than you pay the seller. You collect a higher lease option fee from the tenant-buyer so that you get paid now. You collect a higher rent so that you have cash flow each month until the deal is completed. You collect a higher sales price so that you collect cash later when the deal does close.
How much more you collect in each step is what gives you the most flexibility in how the deal is structured. You could collect a higher option fee now and less profit from the sale at the end if that works better for the seller and the tenant-buyer. Or you could move money around to make the rent lower, so the tenant-buyer can save the remainder of the down payment faster. There are many different ways you can make a sandwich lease option a WIN-WIN-WIN for everyone.
The flexibility of a sandwich lease option is the most powerful tool that the investor has!
How Everyone Benefits from a WIN-WIN-WIN Sandwich Lease Option
The seller immediately collects some cash and begins collecting rent without becoming a landlord. You, as an investor, find a tenant-buyer to collect a larger lease option fee and begin collecting more rent than you pay to the original seller. The tenant-buyer now lives in the home without the hassles of qualifying for a mortgage until they can purchase in the near future.
By creating a sandwich lease option with favorable terms for everyone, you have added value to a deal that otherwise never could have been put together. When you learn all of the details, you’ll understand how to use the tenant-buyers lease option fee to pay your lease option fee to the seller. That means you can put together the entire deal without a nickel ever coming out of your pocket.
You never have to replace a roof, install a new furnace, or invest your own money fixing the property with sandwich lease options. What you do is fix the structure of the deal to be a WIN-WIN-WIN for Everyone!
Here are even more benefits to sandwich lease options and creative real estate investing that you want to discover.
- Your Wealth Building Arsenal.
- Advanced strategies for Buying and Selling with Lease Options.
- Investing In Real Estate with Lease Options.
- Cooperative Lease Options when the time is right.
- Expand to Get the Deed “Subject To.”
- Add Personalized Coaching.
- Round it all out by Working with Realtors.
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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