What Is a Sandwich Lease – No Money Down #5
One of my favorite strategies for acquiring real estate with no money which is a specific type of seller financing, it is a lease with an option to purchase. Sandwich Lease.
What is a Sandwich Lease? How do you do it?
This is a lease with an option to buy. Let me help you understand what this is. Instead of me, going to the bank and try to explain to them what I’m planning to do to give me a loan, I am going to skip the whole process instead. I’ll go to the person that is trying to sell her house and say, “hey you’re trying to sell the house. What if you let me rent that home and in time, I will buy it from you or I will make sure it gets sold”. A lot of people don’t really need to sell their house right away but also they don’t want to manage the stress of mortgage payment. They always have a reason for wanting to sell the house. Sometimes, the solution that you can provide for them is the idea that simply says, “I’ll cover your payments”
Let’s say we have a house for $200,000 and you can get it for $150,000 and it runs for $1,000 a month. What I’ll do is to approach that person who’s trying to sell and say “I’m not in a position to buy this right now but I will make the payments. I will cover $1,000 per month.” That might just solve their problem right there. Offer them a contract 1 year, maybe 2 or 4 that might just solve their problem for a while. What you’ll end up doing after is write a contract that says “I’m going to rent this house but I have an intention to buy it.” Hence, lease with an option to buy. One form of seller financing.
Now that you control the house and let’s just say that the owner just wanted first and last month’s deposit and I gave them a couple thousand dollars, I’ll now put up a sign that says “rent-to-own”.
I’ll have an open house, people will come to show up and then you get to show up and say “alright if you give me three, five, seven or ten thousand dollars down your rent payment on this could be $1100, $1300 or $1500 ” if you one of those people takes it and gives you say, $5,000 deposit with a 12 month lease on it for $1300 a month now you’re in a good position.
Think about it. You owe the seller how much? A thousand. How much are you getting paid in this sandwich of profits? $1300. You paid $2000 deposit and collected a $5000 down payment. You made a spread of $3000. You know have a $300 a month cash flow from the monthly payments.
The house is originally priced at $150,000 and now you can set the minimum price for $200,000.
That’s a $50,000 margin!
So with a couple thousand dollars in a short time later, collecting $5,000 and a spread of $300 a month in the sandwich seller financing deal you have secured for yourself $50,000 of equity.
This is a real strategy! and this is available to your right now!
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