What is a Sandwich Lease?

Posted on Sep 13 2017 - 2:28pm by Lance Edwards

chirsBy Chris Prefontaine  —  A Sandwich Lease is created when you put a home under agreement via a lease/purchase document (Our members have access to all our forms) and then sell the home via lease/purchase (the market statistically searches by and understands Rent to Own but it’s the same thing) to your buyer. By doing this you’ll have created a payday when you secure your buyer and the monthly paydays as they pay their lease and a nice juicy payday, on what I call the back-end; which is when your buyer gets financing and cashes you out.

The three paydays is my ideal set up. But, sometimes if you don’t see a monthly and/or back-end possibility (we teach you how to determine that in our coaching & mentoring ® of course), the deal can however still be very lucrative, with the first payday being to simply procure your tenant/buyer and then you assign them back to the seller and pocket a nice hefty assignment fee. Our average last year was $16,000 and our average this year is approaching $18,883, as we get smarter and smarter over time!

Think about what I just shared with you – we show you how to do your own Sandwich Lease deals and you average $16k-$18k per deal…Hmmm…How many of those do you need monthly? At the time of this writing we are doing 4-10 per month and are starting to scale upwards.

Why would a seller sell to you via lease/purchase and not just sell outright?

There are several reasons that I’ve seen sellers doing this. But here are a few, along with the structure you would use.

  • Seller owes more than the property is worth.
    • Long-term lease/purchase ® whereby the principle reduces and the market increases over time. Seller thrilled to have mortgage taken care of.
  • Seller owes what it is worth so if they go to the closing table they would likely have to come up with cash that they don’t have or don’t want to part with.
    • Same as over leveraged example above; but the term isn’t quite as long. You can determine how long, by checking the approximate principle pay down monthly on the mortgage. You’ll then calculate how many years you’ll need based on the profit you want to create on the back-end. Personally I don’t do the Sandwich Lease deals unless the total profit exceeds $50,000 counting the three paydays I mentioned in above.
  • Seller has no debt on the home but wants top dollar and doesn’t mind waiting to get that.
    • This goes for any of the other scenarios as well. We’ve done two properties in the last few months that were 100% debt free, both over $800,000 homes. These are nice because you can do owner financing with terms; a different article and different seminar!
  • Burnt out landlords
  • Seller has tried to sell FSBO (For Sale by Owner) or with a Realtor and for any number of reasons has not had success.

The best thing about all this is that you can earn money in real estate WITHOUT USING YOUR CASH AND WITHOUT UTILIZING CREDIT.

Chris Prefontaine

http://www.smartrealestatecoach.com

 

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