Sandwich lease options are successful for many reasons. You control the property without owning it. Profits are very healthy with 3 income streams. It’s
easy to get out of if everyone isn’t happy. And unlike most real estate investments, you can have as many sandwich lease options in progress at the
same time as you want.
Sandwich lease options are also easy to put together as long as
you have a process that pays attention to the details.
The nuts and bolts along with tips for success are what follow…
Sandwich Lease Option Nuts and Bolts
A sandwich lease option happens when an investor leases a property from an owner (seller) and then subleases it to a tenant-buyer. The purpose of the sandwich lease option is for the tenant-buyer to complete the purchase at a future date that is typically 12 to 18 months in the future. The investor has a separate contract with the seller and another with the tenant-buyer. The fact that the investor is in the middle of the two contracts is the reason it is called a sandwich lease option.
The first contract basics with the seller include the monthly rent, any upfront costs, the purchase option fee the investor pays the seller, the purchase cost, and terms. The terms are where most of the details come into play. Details like how long the option period is and who is responsible for maintenance.
The second contract of a sandwich lease option is between the investor and the tenant-buyer. It has many of the same basics such as monthly rent, upfront costs, the purchase option fee the tenant-buyer pays the investor, the purchase cost, and terms. This is where the investor builds in his or her 3 profit points that include the purchase option fee, the monthly rent spread, and the final purchase price.
Writing the two contracts correctly is key to a successful sandwich lease option.
More Tips for a Successful Sandwich Lease Option
Follow these and other tips in the course materials to make your sandwich lease options go off without any major issues and so that you (as the investor)
achieve the most security, income, and fairness for everyone involved.
Tip #1. Qualify the seller. This is a tip that you aren’t likely to find anywhere else. Most investors focus on qualifying the tenant-buyer as being able to
qualify for a mortgage to buy the home in a reasonable amount of time. Before you get to that point, you need to first qualify the seller. You need to verify
information like the seller’s equity in the home, their house mortgage payment, and make sure there are no liens on the property other than the
mortgage. You use the mortgage payment information to be sure there is enough spread for you to earn a profit on the monthly rent. You use the equity
to determine that the final purchase price leaves profit for you after the mortgage is paid in full.
Tip #1 is critical to a successful sandwich lease option.
Tip #2. Keep the seller in the loop. Sandwich lease option investors must be honest and upfront. A few investors think they can get more sellers under
contract if they don’t tell them what they are doing. A common bad move is to imply to the seller that you’ll be living in the house rather than being upfront
that you’ll be leasing it to a tenant-buyer. This can blow up on a deceitful investor for many reasons. It might be as simple as the seller showing up at the
front door the day the tenant-buyer is moving in to see how things are going. It will almost always happen long before you get to the closing table or at the
closing table after you have had the deal in place for a year. Deceit will give the seller legal reasons to break the deal with you and you will no longer be
able to complete your deal with the tenant-buyer. Be upfront and honest from the beginning to make everyone comfortable with the arrangement. Your job
as the investor in the sandwich lease option is to solve problems and make the process smooth, so do that!
Tip #3. Have your contract with the seller longer than with the tenant-buyer. This should be intuitive. If your contract with the seller is shorter than
with the tenant-buyer, they could wait for the first contract to expire and cut you out of the deal.
Tip #4. Screen the tenant-buyer. Failing to perform due diligence on the tenant-buyer will put you at the highest risk of the deal not being completed
because the tenant-buyer cannot qualify for a mortgage in a reasonable amount of time. If you don’t screen properly, your problems could start as soon
as they fail to pay the second month’s rent, or you find they are not taking proper care of the home. The Sandwich Lease Options course goes into deep
detail about this subject but among the most essential are:
– Run a background check. It should include evictions, criminal activities, and employment.
– Run a credit check. You need to establish what credit score you will accept and more. The tenant-buyer does not need an 820 credit score but it should not
be so low that it will take five years to qualify for a mortgage. You want to go through the details of the report. A few late pays two years ago are probably
going to be fine. A bankruptcy six months ago is not going to get fixed any time soon.
– Determine their stability for both employment and where they have been living. You need some verifiable income information to assure they will be able to correct their credit problem and qualify for a mortgage. You also need to know they have stable employment rather than changing jobs every six or eight
months. Being stable enough to complete a sandwich lease option deal also means they have a history of living in one place for more than six months or a
year.
– Don’t discriminate. This is for your protection as well as being fair to all applicants. Not following fair housing laws could get you fined or in other
trouble with the law. Know your local and federal discrimination laws and adhere to them.
Tip #4 is critical to a successful sandwich lease option.
Tip #5. Arrange to pay the seller’s mortgage. Failing to do this risks that you send the owner a payment each month only to later learn the bank is
foreclosing on the property because the owner decided to pocket the money rather than pass it on to the bank. There are several ways you can arrange to
stay on top of the mortgage payments.
Tip #6. Legally record your option contract with the seller at the appropriate county administrative department. This puts a “cloud” on the title. The owner will not be able to sell the property until it’s cleared. Otherwise, the owner might decide to sell to another buyer. Your only recourse would be to enforce
your contract with the owner by filing an expensive and stressful lawsuit.
Treat your sandwich lease options as a chance to create a Win-
Win-Win for everyone. Your reward is 3 paydays — Now from the
option fee, Overtime from the rent spread, and Later from the purchase price!
You can start writing your sandwich lease option success
story right NOW!
1. Advanced strategies for Buying and Selling with Lease Options.
2. Your Wealth Building Arsenal.
3. A fast start with Cooperative Lease Options.
4. Success by Working with Realtors.
5. Investing In Real Estate with Lease Options.
6. Add Personalized Coaching.
7. Expand to Get the Deed “Subject To.”
To Your Success,
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.
If you found this information useful, please visit again soon at WendyPatton.com.
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