Surprisingly, the sandwich lease option is the most overlooked investing strategy when it comes to delivering the biggest bang for NO Bucks and NO Risk! Sandwich lease options allow investors to gain the benefits of rental property ownership without owning the properties and with little or none of their own money invested. It astonishes me every day that real estate investors are passing on this proven method that can easily boost their annual income by $60K or More, simply by putting two of these deals together each year.
$60,000 ÷ 40 Hours Work = $1,500 Per Hour
Only 3 Ingredients Needed for a Successful Sandwich Lease Option
Sandwich lease options are so simple that you can do these as a side gig to get your foot in the door as a new real estate investor or as an already established investor also doing full-time rehabs and flips. How many you ultimately decide to do is completely up to you. What’s important is getting started.
The three ingredients needed:
- A seller willing to learn how a creative sales solution maximizes the sale price and total profit.
- You – as a knowledgeable investor capable of putting the deal together.
- A tenant-buyer eager to complete the purchase before the option period expires.
As the sandwich lease option investor, you are the meat in the middle. You run a few free advertisements to find the seller and the buyer. You paste the dollar amounts into a contract template to be on your way to an extra $30,000 this year. Rinse and repeat for $60K, $90K, or whatever you decide!
Really! You can put together a sandwich lease option for 20 or fewer hours of effort. Each one can easily earn you $30,000. Two each year will boost your income by $60K!
A $30,000 Example
I want to be clear. You’re not going to collect the entire $30k next week. But it only takes a few hours to put the deal together, so the money keeps rolling in for several months until it adds up to $30K or more. First, you will make a big chunk from the option fee as soon as the paperwork is signed (in the first few days). Second, you’ll receive a monthly check from the rent spread. Third, you’ll receive another big chunk when the tenant-buyer proudly completes the purchase in about a year.
Do you know a landlord ready to throw in the towel to be done with renter hassles? These are only one of the types of sellers that are interested in maximizing their profit with a creative solution that keeps them collecting rent for another year while the tenant-buyer does all of the repairs and maintenance. And then the landlord collects the sales price at the end of the sandwich lease option.
Susan is a landlord ready to sell to an eager tenant-buyer, but Susan doesn’t know how to go about it or even the first step for finding and qualifying a tenant-buyer. That’s what you do as the sandwich lease option investor. You bring Eric into the deal as the tenant-buyer. Eric is excited to pay you $1,200 a month in rent for the exclusive right to buy the home for $250,000 in the next 12 months. Your deal with Susan is to pay her $900 in rent until you purchase the home for $225,000 (on paper). That means that your rent spread is $300 a month or $3,600 annually.
But first things first. The option fees for the exclusive rights to buy the house at a future date must be paid before the rental agreement is signed. You can negotiate both the rent and option fee at the same time, but the option fee is paid first. The smart investor structures the deal to use the tenant-buyer’s option fee to pay their fee to the seller (no cost to the investor). Of course, the fee to the seller is much smaller than the fee collected from the tenant-buyer. A common option fee from the tenant-buyer is 5%. In Eric’s case that comes to $12,500 for the $250,000 purchase price. You pay Susan a $7,000 option fee. Right from the git-go both you and the seller have collected a handsome paycheck. The $5,000 difference between what you collected from Eric and paid to Susan is your first payday as the sandwich lease option investor!
When Eric completes the purchase, you collect the difference between what he is paying and what you have to pay to Susan. That’s your third payday for the biggest $25,000. So, let’s add up your three paydays.
You collect a $5,000 option fee + the $3,600 rent spread + the $25,000 difference in sale prices = $33,600. Great! You collected more than $30K! Do this twice a year for a $67,200 boost to your income!
All without using any of your credit, no loans, no banks, and without putting a single penny at risk.
Tips for a Successful Sandwich Lease Option
Because sandwich lease options deliver high profits for little or no cost, you can scale your new business up very fast. With a few of the right tips, you can be generating a ton of cash in a few short weeks. Not only do lease options offer a very low barrier to entry, but they also enable much faster growth because the cost per deal is almost zero. Keep in mind this is NOT about cleaning out rain gutters and fixing a broken water heater.
- You want a longer option period with the seller than with the tenant-buyer. There are two reasons for this. First, you don’t want your exclusive option to purchase from the seller to expire before the tenant-buyer’s option expires with you. Second, in the rare event that a tenant-buyer doesn’t complete the purchase, you want some time to replace the original tenant-buyer with another who will complete the purchase.
- Keep everyone informed about what is going on. You want to do all your sandwich lease options with integrity to develop trust. For instance, if it’s going to take the tenant-buyer two months extra to complete the purchase than is remaining in the option period, you don’t want the seller to walk away from the deal because they have lost trust in what you have or have not told them before. You also want both the seller and tenant-buyer to refer you to friends and family because you run an honest and transparent business. One place to start is by never telling the seller that you’ll be living in the house. They should know that it is a sandwich lease option because they will find out sooner or later.
- Finding the right tenant-buyers is key to your success. A tenant-buyer that hasn’t been employed for two years and has a 540 credit score is not going to complete the purchase. You must screen your tenant-buyers well! Besides understanding the numbers, this is the most important step to ensure a positive sandwich lease option outcome. I go into a lot of detail about screening tenant-buyers in the course materials.
- Keep your option contract with the seller in good standing. One way you do this is by making sure the seller keeps his/her mortgage payments current. You can make the payments yourself or have a third-party escrow do it for you. It’s also good to have your option contract on the property title to show your financial interest in the sale of the property.
- Use your power responsibly. This gets back to integrity. There are a few sandwich lease option investors that think it is more profitable to do things like placing a poorly qualified tenant-buyer in the property so that you can replace them in a few months with another tenant-buyer who pays another large option fee. This kind of unethical behavior gives sandwich lease options a bad name. Don’t do it because you’ll never have sellers or tenant-buyers sending more business your way for a steady stream of highly profitable deals. Use your power to create win-win-win sandwich lease options that help others get what they want as well.
Use your sandwich lease option power for good!
Ready to add another $60K to your income this year? Why Wait? Here is what you need to Start Now!
- Your Wealth Building Arsenal.
- Advanced strategies for Buying and Selling with Lease Options.
- Investing In Real Estate with Lease Options.
- Add Personalized Coaching.
- Cooperative Lease Options.
- Expand to Get the Deed “Subject To.”
- 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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