What is the main Difference?

[Deangelo Mack]

Hey folks. Ive ran through the forums to answer my question, went to google and youtube, and still no solid answer. Can some on please explain the main difference between a Lease Option and a Sandwich lease option. Thanks in advance.

[Joe Villeneuve]

Easy.

Lease Option

A LO is a 2 contract (two SEPARATE contracts) agreement.  One contract is a Lease, and the other contract is an Option to buy the same property.  They are NOT to be combined, or referenced to eachother at any time.

Sandwich Lease Option

A Sandwich LO is two sets of LO's...with the REI in the middle. Think of it this way:

Bottom Bun - The first "set" of LO is between you (the REI) and the owner of the property.

Top Bun - The 2nd "set" is between you and the tenant buyer.

Meat (& spread) - You are in the middle.

You charge more on the lease to the Top Bun, than it costs you from the Bottom Bun....and, you charge more on the Purchase (when the option is executed) to the Top Bun, than you are charged to buy it from the Bottom Bun.

Object:  To make money on the "spreads"

Spread #1 - Difference between lease payments

Spread #2 - Difference between Option Considerations

Spread #3 - Difference between purchase Prices