How to do a sandwich lease

Hi, I am new to this and trying to get started. If I want to do a sandwich lease is there a way for me to line up a tenant/buyer before I sign a lease with the seller? Or should I just bit the bullet and Lease/Option it if it is a good deal and then find a tenat/buyer? thanks

Sandwich lease options are very risky. Do a search of sandwich leases on this site and do some reading.

Good Luck,


Sandwich lease options are risky only if you do them incorrectly. . .just like anything else. I’ve done my share without problems.
If you want to have a database of available tenant/buyers, simply run a dummy ad for a property and begin to gather information. Then go out and find a willing homeowner and go from there. And you needn’t worry about having a t/b lined up, as you say. Assuming you use good agreements, there should be an escape clause of some kind to alllow you an out if you can’t locate a t/b in time.

Sandwich lease options are risky only if you do them incorrectly.

I guess we all have our opinions. Simply because you’ve done a few and haven’t had any problems doesn’t make them any less risky, just means that you haven’t experienced any issues, yet.

L/O’s are risky because you do not have the deed to the property. He who controls the deed controls the deal, period. That means it’s NOT you. If you’re not in control, then it’s risky.

Even if you control every aspect of the deal, mortgage payment, insurance, etc., the homeowner can still go out and get a new loan on the property (without mentioning it to you), the homeowner can still file bankruptcy (without mentioning it to you), the homeowner can still end up selling it to someone else (even if you filed your L/O), the homeowner can still decide NOT to sell at all.

Nowadays especially, sandwich L/O’s aren’t viable because current lending practices make them virtually impossible for the end buyer/tenant to actually close on the deal.



It is good to have a buyer’s list. But keep in mind that the attention span of tenant buyers are small. Meaning that you may have a home today or not but by next weekend they maybe onto something else.

There is risk involved as Roger has stated. Can they be mitigated? Yes. Education is the key. Control is an issue. I have done several SLO’s and never had a problem. I for one prefer to own the home and then lease option but there are some cases that I would prefer to SLO.

It really depends on the deal.


Glad to see you have Made the right choice to start out in lease options…
I Love lease options…
Ok kid We’ll help you out here, This is what I do:

(this is the contracts with you and the Landlord) “aka” controling the Property.
note: 3 contracts
1. Lease contract (i do 3-5 years)
2. Option to purchase contract (giving you the sole, unqualified right)
3. Signed Purchase contract (with a clause that gives you an out to the closing date, I use : “this contract is contingent upon your personal approvel”.

Now the trick is to put the “lease option package” under a 30 day contingency “your personal approval of a sutiable tenant”.

They must agree to all of this or fricken move on…
You may have to go to 20-30 prospect to find the right one.

OK you have found the right Property …

You now have 30 days to get your tenant buyer…

  • this is what I do for contract with my tenant buyer -

3 contracts
1 - Lease 2years (be careful not to go to long, your option on the front end you need at least 12 month buffer at least I think so)…
2-option contract ( you charge $3k- $15k for this right, this is called option consideration Money)
3-purchase contract (this one has no clause, your tenant exercises there option on moving in.)
This is to get the tenant believing this is there house so they take care of the home!

Its pretty simple Bud any question feel free to ask!

This is coming from someone that has done this many, many times last year and this year we are planning on doing 50 plus this year…
This is the most powerful way to control a property In my opion with out paying the high price of owner ship…

Ok Listen HERE these are the things I watch out for:
DO NOT do this with a landlord that might loss the home to foreclosure…
Ask question about there mortgage…
is it an option ARM, etc?
How much are there debt service on the property.
Keep in mind it is not Good to have the landlord get foreclosed on while your tenant buyer is in there home…
NOT FUN… Never happen to me but I have heard of it…
This I would call “the elimate of RISK”…
Just becarfull that the landlord is paying his mortgage!!!
Just play it smart… Dont make any Promises you can’t keep …
And Never, Never Ever ever “bite the Bullet”…
good luck!!!

Just when I thought I had it figured out. Thanks for the info, I didn’t realize so many things can come into play when doing a sandwich l/o. I’d like to start out small such as condos and townhomes, has anyone had more success with sfr vs condos.

There are alot of potential problems that can happen with a SLO. Those are just the tip of the iceburg.

As matshingdo001 layout goes, there are potential problems with it as well.

First, most states in which I know of the laws concerning such do NOT allow a lease longer than 3 years, or to be more exact, view a lease longer than 3 years a contract for deed (disguised). Bad both legally and financially (especially for the landlord involved).

Second, purchase contracts are good, but not required. Using a clause like “this contract is contingent upon your personal approvel,” in a purchase contract is, and no offense intended, laughable. One, it would take a VERY motivated seller to actually sign this (which, as stated above, may cause problems) and two, any judge (should it come to that) would say (rightly so) that you DID personally approve it BECAUSE you SIGNED it.

Third, I’ve heard of the “subject to finding suitable tenant” clause before, too. Again, takes a VERY motivated seller to sign this when they could simply wait 30 days THEMSELVES to find a “suitable” (whatever that means) tenant. And again, if this would come before a judge, they would want to know exactly what “suitable” meant.

Fourth, you do want to collect an option fee or consideration. However, without knowing the dollar amount of the property and where it’s located, it’s hard to say what you’ll get as an option consideration. Generally speaking, you’ll get about 1-3% of the purchase price.


You cannot do this business to long until you have someone with there panties in a knot about something…
I have a personal friend that has been to court several times over this issue of lease option in the state of Florida with many aspects…

On the contingency clauses they have stood strong and “the deal was a deal” the judge said And threw the law suit out!

Conditions on contract are strong!, that is called having control over the property and if an owner is in sound mind and sign’s the documents it stands, an owner can relinquish there control over a property if they choose at that time, once again the courts realize that there are Indian givers and a deal is a deal…
Yes you have to find a motivated buy that is the whole Idea…
Listen UP GUYS, you never will make money if you are not dealing with someone that is not willing to through there keys in the street for one reason or another, Motivation is the key.
WE are not try to rip people off, you have to be in control and We create problem solving.
No offence to anyone and every one has there different views on doing business and how to control a property, What is moral, what is right, what is legal, what is ripping someone off, How far do you go, do you take control, if you know the person will take a $1.00 and they are asking for $100. do you only give them a $.50 and tell them to eat the rest and if they do, should you feel bad, or is it just wrong?
This is something an investor needs to evaluate and come to terms with on there own field of personal moral.
I do know this that if you make educated, calculated risk you will do Well, if you live in fear you will do nothing and if you are reckless you Could lose a lot!
Be smart, be fair and you will be ok…
Now go out there and do a deal and make money Today!!! :bobble

I agree, you can’t go wrong with contingencies.

I never head of using personal approval, but I’ve heard of partner’s approval.

You have not approved of the deal by signing, you have 30 days to decide if the home is right for you. Within that time frame you can inspect the home and find something wrong and not approve of it, and exit the deal…You could research the deal and find out the area is a bad neighborhood…or you could find that the economy in that area is going downhill…All these reasons would be viable and can be an exit strategy for you saying, “I do not approve of this purchase and will exercise my contingency.” I can’t see a judge laughing about that. Also, many many sellers would sign off on this because they know you’re not the one moving into the home, but you have a vested interest in getting their property filled quickly.

No offense Roger, but 1% is a little low for an option fee. I stick with 3 on up. If I go 2.5, they’re breaking my back. lol

I’m not here to argue with you or anything, but my experience is that sellers sign up for deals like this in a heartbeat. Especially in this market.

It’s all about how comfortable you are when you operate your business. As matshing said, you need to be integrous & educated in your doings, as well as fair and you’ll be find. Don’t waste your time with unmotivated sellers!

I cherry pick all my seller leads anyway :slight_smile:

No arguments at all Lamar. It’s all opinion, to a point, anyway.

Still, you’ll have to forgive me because I don’t come on here spouting out how “easy” the REI business is, or that I do THIS “all the time” or I’ve done “hundreds of these” or “more than I can count,” etc, etc. I don’t have anything to prove here, and I simply won’t get into what those statements REALLY mean in the real world. I also usually go primarily from my personal experiences in the business rather than the “friend of a friend” theory, too.

As far as contract signing goes, Lamar, no offense, but you are wrong. By signing, you HAVE agreed/approved of the deal, as it is stated in the contract. Now, if your contract has specific contingencies about inspecting, area approval, etc, THEN that is a specific performance that must be met in order for you to move forward with the contract. Otherwise, if you find out something that you do not like, you are at the mercy of the terms of the contract, which usually state that the seller will accept your escrow fee as damages, should you decide to simply not buy. So again, using a contingency like “subject to my personal approval” is basically saying that your signature doesn’t mean squat. And yes, you’ll have seller’s that would sign on the dotted line even if it had that they must give you their firstborn child. Believe it or not, there is such a thing as TOO motivated. Those are the sellers that will stand the greatest threat of making your life miserable once they DO get on their feet. But again, just an opinion.

As to option fee, 1% may be a little low for your area. If you’re reread my post, I mention that without knowing specifics, it’s hard to say. The 1-3% was a GENERAL guideline.

Much more than 3% as a down, then you SHOULD be trying to get them financing vs. a L/O. FHA requires only 3% down and the more down, the better chances of getting financing. But there again, that is ONLY for investors whose goal is to ACTUALLY sell the properties.

Also on your option fee amount, you have to have a good balance between option fee vs. holding time. For example, an investor in this area and I both do L/Os. We had similar properties. He requires a $3K option fee, first and last month’s rent ($750) upfront or $4500, in order to move in. I required only a $1500 option fee and first months rent in order to move in. I rented mine unit in 3 weeks vs. the six months that his sat on the property. So, who made more money?



 I feel where you're coming from. I speak from personal experience too bro! Trust me, this biz aint that easy. If it was, I probably wouldn't be in this forum trying to help out and learn from other investors, such as yourself. I have learned a lot from some of your posts. FYI

However, I want to make one thing clear. I never said that I would sign a contract without a contingency (exit strategy). That’s just crazy from an investor standpoint. You’re absolutely right when you say that without a contingency you are liable for performing on the contract, which in turn you’ll hand over the escrow fee for the seller’s liquidated damages. I feel you on that. That’s why you always have to have a contingency.

Once again, I have never heard of “Subject to my personal approval”. I always use, “subject to my partner’s approval” because essentially they will be the one to approve of the deal anyway. By putting subject to partner’s approval, that will cover inspections, area research, etc. If I was to bring you a great deal, the first thing you’ll probably do is some research, or if you already know the area, you’ll come buy and check it out. Basically doing a (“Self inspection”, so to speak) If you don’t like it, you tell me so, and If I can’t find anyone else then I’m walking away from the deal.

Anyway, I see your point about the option fee. That is a very valid point, that many don’t take into consideration. Like you said, it’s all about opinion. I totally agree. I’ve had Tenant buyers put more than 3% and they were no way ready for financing. Credit score was a mess, but it could be workable in a 12 month timeframe. I usually just advertise at 3% or I’ll start at 5% and go down to 3% over time. 6 months is way too long! If it takes that long to do a lease option, then I don’t think it would be too much about the option fee, I think that would be more on the area or the house itself. Or more importantly, the investor’s consistency and effectiveness in marketing the deal.

I do have a question for you though. If you use FHA for your Tenant buyer’s, do they have any seasoning requirements? I haven’t personally dealt with FHA on lease optiopns. I know if you do a shortsale they require 90 day seasoning. What’s your take on that Raj, as I honestly don’t know…

The 90 day FHA seasoning still applies as far as title is concerned. In other words, you have to own the property for at least 90 days before someone getting FHA backed financing can buy it.

As far as the lease option goes, that depends on the actual lender that is doing the deal. In most cases, at this present time, FHA lenders want to see a tenant, be it from a rental, lease, or l/o with at least one year of on time payments to the landlord, and no 30 day lates on ANY active accounts on their credit report. FHA itself does not require ANY credit score in order to qualify. The ability to pay (debt to income) is the primary qualification. However, most FHA lenders have set a minimum credit score of about 560-580 before THEY will approve financing, though there are still a few left that go solely off of FHA guidelines.

FHA does place some pretty strict requirements on the property, though. What they are depends on area and style of housing (doublewide vs. stickbuilt, for example).


Hello Roger,

I can see you have been doing this awhile… what do you do for a living?
ARe you a realtor as well or have you been?
what is your back ground?

Just wonder?

I have been self unemployeed for the past 10+ years or so, matshingdo001, with about the last 7 or so primarily coming from being a full-time (if you believe in calling it that) RE investor.

As to REI, I’ve done close to a little bit of everything in it. I’ve retailed, wholesaled, birddogged, assigned, lease/optioned (sell side) and trained. I’m very familar with most types of “creative” financing, though I rarely choose to use them myself.

I’ve started/founded several companies over the years, either independently or co-owned. Some of those that are REI related are (of course) an investment company, a REIA group, and a CENTURY 21 Franchise.

I never cared to be a RE agent (you can review older posts on the matter, if you wish), BUT after a couple years owning the realty company, circumstances made it a “must have” situation concerning holding a RE license. You can add selling property as a Realtor to the above in “everything” as well at this point.

A note on that, too. I am (and was) an investor first, RE agent second. From my experience, that makes a tremendous difference in your outlook/approach from an agent standpoint. I’ve met agents that are investors, BUT they started investing AFTER they got their licenses, and to be frank, we don’t think the same way.


Thanks Raj!

To avoid this, 4 months before you have close put the property in a your land trust…
Do a “warrentee deed to trustee in land trust”… when the lender searches the property will show the tittle of the land trust, so be smart on what you name your land trust…

How this helps, If another person asks me about land trusts I am going to do a seminar, Just to save time from typing so much…lolololol

thats why you file a memorandum of agreement to put everyone on notice that you have an interest in the property. the seller can’t sell it, any liens filed after the notice will be inferior to your agreement. plus with a lease option that is why its a good idea to ask your subleasee about them exercising their option so you can line things up before the last minute.

At that point you have the seller get everything in order and if they are moving out of town, get a poa.

hope this helps.

thats why you file a memorandum of agreement to put everyone on notice that you have an interest in the property. the seller can’t sell it

No offense, but if you believe that, then you’ve not been in the business long enough. BK and IRS liens are just two examples items that will come before any “notice of interest” filed at the RoD office.

And point of fact, the seller CAN still sell the property, a notice just makes it a bit more difficult to do so. That’s all. In short, the seller’s closing agent will simply call you up and ask for a release amount. Want to be a jerk about it? You risk not only losing your “interest” in the property but some serious looks for the legal table. Why? Because, if a seller in a bad situation has a bonafide sell that YOU are trying to stop, even a 3rd rate attorney will quickly and easily get your “interest doc” overturned. Then not only are you out, but you have to explain to the judge why you’re trying to take “advantage” of these “poor” people. Not a good place to be.

You should get a POA and you should have everything in escrow from the start. That still does not protect you from a seller still on the deed. He who controls the deed, controls the deal.

Also, trying to get a tenant/buyer to exercise their option or even let you know that they intend to do so is kind of like trying to teach a dog to poop on command. You may get lucky on occassion, but chances are, it’s going to happen when they’re ready.

UPDATE: FHA has temporarily lifted the 90 day seasoning rule.


you can try to act like you are an authority all you want. duh, bankrtupcy wasn’t what i was referring too. even if you take a property subject to a homeowner can still file bankruptcy if the payments are delinquent so you are proving a worthless point.

also you mentioned a tax lien. where did this come from, i think we all have enough sense to know that even with subject to or any deal for that matter a tax lien prevails, but who in their right mind will buy or l/o a property with a tax lien unless there is enough profit. once again you are spewing worthless facts.

and your mootest point of them all, an agent can’t do jack about a release of an agreement and can only refer an attorney. let an agent try to initiate the process and i will fire back with that attorney for the agent trying to practice law without a license and see how long that agent holds a real estate license. you can only fill in the blanks of a contract a state specific contract at that. in nc an investor can right their own contract as long as it has the qualities to make it a legally binding contract. you might need to take some CE courses.

you are making really stupid point and i think you don’t really have anything better else to do. the reason to cloud the title is to protect your interest and if you have a property under contract or even an option you can get the best attorney you want but a deal is a deal is a deal. concerning your claim about foreclosure, you must be smoking some funky sh*t
because to bring up foreclosure. i guess you have to pull out all of your guns to make a meaningless point. to avoid all of that when you collect payments and the owner of record demands that you send them the payments, make the check/money order out to the mortgage company that way you will be sure the mortgage is being paid, in fact get the account number and send the payment to the mortgage company yourself and tell the owner to verify payments and send them a copy of your check/money order. or make a clause in your agreement saying that you will make the checks out to the mortgage company and if the owner then fails to make the payment you will automatically get a credit of $10 for every $100 you have to catch up. see your roadblocks are merely a hurdle.

no one is trying to be a jerk all we want is our fair share and if we have a deal and the owner wants out before our deal expires, tough luck or pay us our dough. for you implying trying to be a jerk i think that is how you want to be perceived as a jerk instead of finding creative solutions you just want to throw up every road block whether it was mentioned or not. if you are pro agents then why don’t go find another forum that pushes your belief.

as for your owner of record not honoring a contract i think courts would love to hea the owners side of the deal to see why they have breached the contract and plus most contracts have clauses for damages so if the seller wants to play like that, then you might as well let your attorney do the talking, and sue for specific performance, then that jerk of an owner will have to pay the fee or get a judgment slapped on the property. then let the owner try to stop making the payments. as a judgment holder you can make the payments on the mortgage to protect your interest and the court will force the owner to sell the property and the investor will get all profits or the difference from the superior liens to the final selling price.

you make a good argument. NOT!!! Heres to you kid

we are waiting for your next flaring anti-investing facts.