Sandwich Lease vs. Assignment of Lease Option Contract

4 Replies

I'm very interested in switching from the Assignment of Lease Option Agreement to using Sandwich Lease Options to improve my income.  I've done a number of Assignments but no Sandwich Lease Options.  Finding properties where the #'s would work of a sandwich lease and still be attractive to the seller, seems challenging.  Any insight would be appreciated!

The key is to find really motivated sellers. They want to do your deal because they have no other option and they are tired of losing money every month. Then you structure something that makes sense for both of you that you can market to find a tenant buyer. 

Thx, Jim.  I was just wondering if there was different criteria for finding sandwich lease sellers vs. assignment lease sellers.

In order to do a sandwich lease option the seller does need equity ( in my opinion and experience ) - however that doesn't mean your price can't be close to the retail value.  Let me explain:  if I can buy a $200,000 house from an owner who has a lot of equity - i might be able to negotiate terms of a $1000 a month with a purchase price of $195,000 - BUT the $1000 gets applied each month to the purchase price.   Will all sellers apply all $1000?  no of course not, not all sellers will accept $1000 on this deal, however some will and it gives you the potential to negotiate.  For instance maybe the seller will only give you $500 credit?   If so, after month 1 you owe $ 194,500, then after month 2 you owe $ 194,000...... imagine what you would owe after 3 years ?   5 years?  you get the idea...you are building equity on a property you don't even own yet.  Also......with this type of rental amount you will have a big cash flow amount.   In other words, price is only one part of the equation.  Look at other areas to structure a deal that might work for a sandwich lease option - if not, wholesale it off to a tenant buyer.

Wendy,  thanks for your reply.  I have always enjoyed the information you have shared with us and I really liked your book.  Have a Great Day!  Bob Burns

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