I’m about to describe a real estate investment strategy that has worked quite well for some investors I know. But, it will not work in all markets, and it will not work for every investor. Sure, it’s a way to possibly have zero of your own money tied up with monthly cash flow coming in. However, more time, effort and skill is needed to make it work. OK, if you’re still interested, let’s talk about the sandwich lease.

1. The Sandwich Lease - Another Kind of Flip
I’m about to describe a real estate investment strategy that has worked quite well for some
investors I know. But, it will not work in all markets, and it will not work for every investor.
Sure, it’s a way to possibly have zero of your own money tied up with monthly cash flow
coming in. However, more time, effort and skill is needed to make it work. OK, if you’re still
interested, let’s talk about the sandwich lease.
It’s called that because two lease purchase deals are involved. The investor is in the middle, with
a deal on each side. Here are the players and their motivations:
 The home owner: This person owns a home and needs to move. For any one of a
number of reasons, from timing to mortgage balance owed, they can’t sell, but they are
motivated, perhaps to move for employment. Some owners in this situation will be
agreeable to lease out their home with an option to buy it for a period usually of three to
five years. They get their mortgage payments paid, though they’re still responsible for
the loan. But, they get to move pretty quickly.
 The tenant-buyer: This is someone who would like to buy a home, but they can’t right
now. Usually they’re trying to repair their credit and/or they don’t have a down payment
saved up. They want to own, but are leasing currently. The tenant-buyer(s) want to own
a home, and if they find one they like with a lease-purchase (rent-to-own) available.
They get to move in and live in the home the eventually plan to own.
 The investor: The investor wants to execute a lease purchase (rent-to-own) agreement
with the homeowner, and then do another one with the tenant-buyer. The investor is in
the middle, helping both of the other players to reach their goals. The investor matches

2. up the two lease-purchase timelines such that they both expire about the same time. So,
we have the investor paying the lease on the home and getting lease payments from the
tenant-buyer, with a monthly positive profit.
To make it clearer, let’s do an example set of transactions. First, the investor is always
marketing in classifieds and on Craigslist to have a rotating list of tenant-buyer prospects. These
ads offer rent-to-own homes in nice neighborhoods. When people respond, their requirements
are noted and the investor tries to find homes that will be in demand. Several wanna-be buyers
are interested in several of the nicer subdivisions, and rents in those areas are running between
$1,600 and $2,200 per month depending on the home.
The investor is also marketing in the same places to find people who need to move and having
trouble selling. Of course, just finding a motivated owner isn’t enough, as the numbers have to
work. There should be some equity, not an underwater loan. So, the home currently has some
value in the marketplace.
Also, the monthly mortgage payments, including escrows for taxes and insurance, are reasonable
enough that the home can be turned over and leased for more each month to get that positive
cash flow. A motivated owner is found with a home total monthly payment of $1,450. The
home has very little equity, which is why they can’t sell and pay commissions, but it’s not
underwater either.
Once a home is found that could be a match for a tenant-buyer, the investor negotiates with both
of the other parties to put the deals together. In our example, the investor is successful in getting
the owner to lease it to the investor with an option to buy expiring in 3 years. The investor will
pay the $1,450/month, plus a lease option one-time non-refundable $2,500 premium. This helps
the owner to get out from under and have some money for the move.
Then our investor does another lease purchase with an eager tenant-buyer for $1,790/month, a
$340 per month positive cash flow. He also gets a $2,500 (could be more for profit on the front
end) option premium so the tenant get the option to buy at or before the end of the lease. It’s
also non-refundable. Notice, that in most cases, the investor is cash neutral or even positive
when both leases are executed.
The other potential profit piece in this situation is the investor also negotiates to buy the home at
a price lower than they’ll be selling it if all options are exercised. So, if the option to buy from
the owner is at a $255,000 price, the price to the tenant-buyer is possibly $275,000. Keep in
mind that the loan is also being paid down for the three year period, so there should be some nice
profits if everyone exercises their options. Legal and other considerations include:
 A real estate attorney should prepare or bless the leases that will be used in order to
protect the interests of the investor.
 These are “options” to buy, not requirements, so if the tenant-buyer stays for the full term
and decides not to buy, the investor can either let the home go back to the owner or find
another tenant-buyer and keep making money.

3.  If the tenant-buyer leaves before their lease ends, the investor needs to install another
tenant quickly to lessen the loss of rental income.
If you like the idea of this, your task is to see if there are opportunities in your market area. It’s a
free test if you use Craigslist to market for both owners and tenant-buyers.