sandwhich lease FAQ's

I’ve come across other investors looking to get into sandwhich lease options as well. Here are some of the concerns that many have brought up. hopefully some of you on the board can add some insite.

  1. What happens when the seller stops paying the morgage?

  2. What happens when the tenant buyer stops paying you?

  3. How do you explain to the seller that you won’t be the one renting but rather will be sub leasing?

  4. How do you explain to the tenant buyer that you are not the owner but they will be leasing from you?


  1. good question

2.if tenent stops paying there there contract is from them on void and your allowed to give the the boot

3.a motiveted seller wouldnt care as long as u pay them what you said you will dnt have to tell the tenent. Wat does it matter if your not the landlord. as long as there contract with you is Legal then thats it.


right but then you’re stuck paying the payments to the seller. if you can’t get another t/b in there quickly this can be costly to your profit. i wonder how investors minmize this risk.

correct. however, i’m not trying to hide behind the fact that i’m subleasing. i’d rather it be understood so that if the “seller comes by and fixes something”, that it doesn’t make anyone weary. vice versa if the seller see that i’m not the one renting

I’ll answer in another color text below…

I’ll also paste a FAQ sheet I used to use. (I don’t do sandwich lease options anymore, just prefer other methods, but, don’t shun those that do, and have and continue to help others who do them.)

here ya go;

Frequently Asked Questions About
Selling Your House by Lease Option
Q What are the benefits of selling my house on a lease option?

A: When lease options a house, we guarantee in writing that all maintenance, repairs, and many times insurance and taxes as well, will be paid by us while we are selling your house to a sub-tenant/buyer. only deals with high quality people who are looking to buy, not just rent a house. When you sell your house by lease option, handles all the marketing of the house. This includes paying for advertising, screening potential tenant/buyers, and showing the house. We want the process of selling your home to go as smoothly as possible, with no more headaches for you caused by buyers who tell you that they want the house, but end up not being able to qualify for financing. You are also relieved of having to pay double mortgage payments in the event that you have to move before you are able to get a buyer for your home. In short, simplifies the process of selling your home by handling all the details that waste so much of your time and money.

Q What are the advantages of selling my home by lease option over listing it with a Realtor?

A: makes your monthly payment while a sub-tenant/buyer is qualifying for a loan. All or most of your expenses related to the house are taken care of. Try getting a Realtor to do that while listing your home! Another advantage is that is only interested in putting high quality tenant/buyers in the house since we make our profit by selling for higher than we buy. Since we guarantee all maintenance on the house, it is in our best interest to ensure that our tenant/buyer will take care of the home and eventually secure financing to cash you, the seller, and us out. This means that we put our tenant/buyers through an intensive pre-screening process before they are even permitted to look at the house. We don’t just work for commissions, we have a vested interest in the house, and making sure that it gets sold.

Q Are there any fees or commissions I have to pay to do this?

A: No, we do not charge you any commissions or fees. We make our profit by selling the house to our tenant/buyer. However, in most cases, the seller is required to cover at least a few more payments on the house as we prepare to get the house sold. This allows us to apply our resources to market the house and obtain the most qualified buyer. This is in the best interest of all parties, you and us. The ultimate outcome here is to get the house sold, not just filled. We insure with our sales staff and screening process that only the very best, most qualified tenant/buyers are placed into the home. We push very hard to get the tenant/buyers qualified to buy the house sooner rather than later, because this is when we get paid.

Q How long does it take before your tenant/buyer cashes me out?

A That can depend on a number of different factors. We work with many mortgage brokers that are usually able to get most people financed after they have paid for 12-18 months on the lease option. Since everyone’s credit history varies, that time period can be shorter or longer for the tenant/buyer that we eventually put into the home, so we cannot guarantee when our tenant/buyer will secure new financing. However, until our tenant/buyer qualifies for financing, we continue to pay all the expenses related to the house. It is also in our best interest to get our tenant/buyer a new loan, since that cashes us out as well, so we work aggressively to get our tenant/buyer financed as soon as possible.

Q Why don’t I just sell the house myself?

A That is always an option that is available to you. The difference would be that you are responsible for your monthly payment, your taxes, insurance, and any maintenance or repairs that the house needs while you are trying to sell it. You then need to try to find someone who can actually qualify for financing, wait for them to get approved, and hope that they don’t pull out of the deal, making you start the whole process over again.

Q Why don’t I just find my own tenant/buyer to put in the house?

A If you have the expertise to screen potential tenant/buyers, check references, know what sort of credit scores will allow someone to be able to be financed, deal with maintaining your home while someone else lives in it, work with mortgage brokers to get them financed, and finally set up a closing, then finding a tenant/buyer on your own would be a viable option for you. If you lack the expertise in any of these areas, we are able to help.

Q What if your tenant/buyer doesn’t buy the house?

A Our tenant/buyers are carefully pre-screened to ensure that they want to buy the house, and are able to buy it at some point in the future. However, circumstances can change in someone’s life, such as an unexpected job transfer, that make it necessary to move. In situations like that, we continue to pay all the expenses for the house, while we find another qualified tenant/buyer to put into the home.
It is our goal to ensure that the process of selling your home is a smooth and easy one for you. We strive for a win-win-win situation in all our lease option deals. You, as the seller of the house, win by receiving the assurance of knowing that while the house is being sold, all of the expenses are taken care of, and the house is maintained. Our tenant/buyer wins by getting to own a home in a shorter amount of time than it would take them if they were trying to buy conventionally, as well as being able to immediately occupy their new home, while qualifying for a loan. We win by profiting from the sale of the home, as well as gaining 2 more satisfied customers. The reason that we are in business is, of course, to make a profit, as well as use our expertise in real estate transactions to assist home buyers and sellers in making the sale or purchase of their home an easy one.

Jim FL, great responses…for easier reading I’ll post my replies in a different manner.

To avoid this, NEVER make the payments to the seller. Instead, make sure payments go direct to the lender. Most investors using sandwich lease options just mail the mortgage payments to the lender, and keep the difference between that and rent as cashflow. or, sometimes, pay out something in the middle to the seller, if that is the contracted arrangement. Once in a while, you’ll get a seller who is inistent on making the payments themselves. You should be able to overcome this objection, by pointing out that the seller can check with the mortgage company monthly online or via the phone. It’s also wise to make sure the mortgage statements/payment coupons are mailed to you. The other method for handling this, if its the only issue preventing a deal, is to use a service company who collects rent, makes the payments, and sends out the difference to the appropriate parties.

Does the mortgage company every complain about this? How do you set this up? Just call the mortgage company and say My name is ryanpal and I’ll be making the payments for Mr Seller on property xyz?

Simple, you evict. Keep in mind, while you are evicting, and not collecting rent, you are still obligated under your lease option with the seller to make the payments. This is why banking the option money on your first few deals is wise. Later, when you’ve closed some deals and have cash on hand to cover such things, you can apply the option money collected upfront elsewhere if desired.

Good points. Looks like I’ll have to discuss with an attorney how to structure the contract so if an eviction is necessary, the time is minimal (although NJ isn’t too landlord friendly this may be challenging) What’s usually the minimum amount option money you should collect from the seller?

I am the landlord. We work with homeowners, sellers, people in need, investors, whatever. Title is not something most tenant buyers will check, but if asked, we don’t hide the fact either. Again, upfront just makes good sense. This is a service you provide.

Right. As mentioned before, I’m not trying to hide anything. I just want to convey it in a manner so every “feels ok” and is comfortable with it.

thank you for your informative reply ;]

i’m going over your FAQ now. thank you for pasting this, it will be helpful.

if you don’t mind me asking. how come you don’t do sandwhich leases anymore?

I’ll answer your question from the last two posts as best as I can.

First, the payments going to the lender, this does not require any set up per say.
When you are in the due diligence phase of the deal, you should have the seller sign an authorization form, allowing you to contact the lender and verify information. After you are authorized on the account, you can use this form to manage the deal once signed. I usually just have the seller complete a change of mailing address for the account, either online, over the phone, or most times, by simply completing the form for this purpose on the rear of the mortgage account statement or payment coupon.
From here, statements get mailed to me, at my office mail address, c/o my company. Each month when payments are due, you just mail them in, or, pay online, over the phone, auto-debit from a checking account etc.
Trust me here, the lender will not care who wrote the check for the payment, or where the funds came from, they’ll just be happy to get the payment at all.

As for option money collected from tenant buyers, this depends on your market. The norm is usually 3-5% of the purchase price. However, the economy in some areas is slower, so I’ve seen a lot of investors taking much less than the 3-5%.
One here sells everything rent to own, with $1000 upfront, no matter the price of the house.
I still collect more, but market like a madman to get a large pool of tenant buyers.

And lastly, the reason I don’t do sandwich lease options anymore is this…
When we provide a seller with a solution, which boils down to basically offering them debt relief, (making the mortgage payments), I’d prefer to just get the seller out of the picture completely.
I also prefer ownership over control, because if I’m taking all the risk and responsibility with the deal, it just makes sense to control every aspect of it. Much easier to do with the seller done…and, when they sign with me initially, their problem is solved and gone for good. A permanent solution that is immediate.

Jim FL

You don’t have to tell the tenant. Wat does it matter if your not the landlord. as long as there contract with you is Legal then thats it.

i’m not about hiding anything. i’m all about having everyone on board so there doesnt seem like any shady business. im trying to find the best way to convey it to each party so there’s no complications in the future