The biggest secret to finding free money in a sandwich lease option is selling the property before you even own it. What could be lower risk and a surer deal than having at least three funnels of money starting on day one? There are many ways to structure your sandwich lease options and collecting cash upfront is one of them.
Only pay the seller’s option fee after you have a paying tenant-buyer in place!
You Negotiate the Terms of the Sandwich Lease Option
There are two critical mental attitudes that you want to have with your sandwich lease option deals. 1. The deal will be a win-win-win for everyone involved. 2. You are the sandwich lease expert bringing creativity to the deal. Making it a win-win deal for the seller and buyer is about building trust and confidence. That trust and confidence open people up to creative ideas that solve their problems. The basic problem that you are solving for the seller is the ability to move on when they need to and not have a payment on their home. The basic problem that you are solving for the tenant-buyer is future ownership of a home that they will rent today while improving their credit and saving for the down payment over time.
It sounds simple because it is simple.
Now lets’ look at how to pay the seller’s option fee only after you have a tenant-buyer in place. If you are a beginning sandwich lease option investor, there is a good reason why you want to know how to do this. When you can wait to pay the option fee to the seller until after you have a tenant-buyer, you can use the tenant-buyer’s option fee to pay your option fee to the seller. That’s the biggest secret to a sandwich lease option deal that gets you into a deal with none of your own money or credit. If that doesn’t make sense to you right now, you need to read the course materials.
This is where your ability to write creative sandwich lease option deals becomes important. You can sign a lease option contract with the seller to put him or her under contract. And that contract can have a clause saying the lease option fee is only due after you have a tenant-buyer in place. Nothing out of pocket for you… You’ll almost certainly have a tenant-buyer in place by the end of the week or the first of next week. Your contract clause can even say that you only have two weeks to put a tenant-buyer in place. That’s how sure you can be of quickly putting a tenant-buyer in place. And… it’s a win for the seller by reducing their risk time to two weeks or less.
That is only one of many ways to find money in sandwich lease options – but this one is the lowest risk to you as an investor – another win!
Hidden Money in Option Credits
This one doesn’t work with every seller or every deal, but it’s a tool that you must have in your toolbox. You have the right to purchase the house but until you exercise your option, the seller continues making the mortgage payment in their name. Paying down the mortgage means building equity. For every mortgage payment made, the owner gains value in the house equal to the ‘principal’ portion of the payment.
Each sandwich lease option deal will have different numbers. For instance, a $225,000 mortgage at 3.25% that the seller has been paying on for 5 years will include a principal payment of about $435. If the lease period is two years, the principal paid down during that time will amount to more than $10,500. That’s a nice chunk of hidden money that you might not have thought about. Since you have a right to become the homeowner at the end of the lease, it’s entirely possible for you to negotiate owning all or part of the equity that increases over those two years. You do this by including a monthly credit clause in your contract with the seller.
Option credits can add $10,500 or much more to your profit in a sandwich lease option deal.
Two Deals – Two Profit Sources
As an investor, you find yourself on both sides of a sandwich lease option deal. You have contracts with the seller, and you have contracts with the tenant-buyer. These are separate contracts. Each person might know what is in the contract of the other but only one of the contracts affects them directly. On the other hand, you are in both the contracts with the seller and the contracts with the tenant-buyer. That gives you at least two distinct places to look for money. And you still offer custom contracts that make winners of the others in the deal.
You won’t find all the ways you will make money in a sandwich lease options with other investment methods like rehabbing or being a long-term landlord!
But that is still only the tip of the iceberg. One of the first things that you discover with an understanding of sandwich lease options is that there are always three paydays in a deal. 1. When you sign the lease option with the tenant-buyer. 2. Every month when you collect the spread in the rent. 3. When the tenant-buyer completes the purchase – which is almost always the biggest payday that you collect along the way.
Everything in sandwich lease option contracts is negotiable. Make sure any contract you signed is fair to you, the seller, and the buyer.
Let the Cash Flow Begin
Finding the money in sandwich lease options begins by offering the seller a contract that works for them and you by including money that might otherwise be overlooked. You can begin by taking control without investing any of your own money. Then you bring in the tenant-buyer that sees themselves as a winner because they can live in the house today and become the homeowner in a few short years. All along the way, you’ve created a sandwich lease option that provides you a steady passive income stream for the length of both contracts.
That income stream begins on day one when you collect a larger option fee from the tenant-buyer than you pay to the seller. Also on day one, you collect a larger monthly rent check from the tenant-buyer than you pay to the seller. That passive rent income continues every month until the day that the tenant-buyer completes the purchase. On that last day, you collect the largest payday of them all because you sell the house to the tenant-buyer for much more than you pay the seller.
Let me know all the creative ways you find for making money with sandwich lease options?
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Take immediate action towards your creative, fun, and profitable career in sandwich lease options!
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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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