Sandwich Lease Options- Paperwork Organization

The sandwich lease options concept is pretty straightforward and easy for most investors to understand. However, there are a lot of details that go into the paperwork that needs to be drawn up. Here, I bring to your attention some of the most important requirements that go into sandwich lease options.

I'll begin by sharing how I organize the paperwork. For sandwich lease options, I establish two separate files. The first is for the paperwork involving the seller. This contains all of the paperwork the seller and I will be signing. The second file includes all of the paperwork that the end buyer (my tenant) and I will be signing. Both of these files go into the same folder that I title with the house address. Nice, neat, and tidy. Everything for sandwich lease options is easy to find when needed.

Sandwich Lease Options - Three Main Documents

The three main documents can be reduced down to one or two documents but everything remains clearer as to the intent when they are written as three distinctly separate documents. The primary documents for sandwich lease options are:

• Rental/Lease Agreement
• Sales Agreement
• Option Agreement

You'll need at least four copies of each. You need one set of two for you and the seller and a separate set for you and the end buyer. I prefer for everyone to have their own copies with original signatures.

Both sets of paperwork will be close to the same but there will be important differences. Most notably, the different dollar amounts that determine your profits from sandwich lease options. One important difference is you'll require the seller to maintain insurance on the house and put you on the policy as "additionally insured". You will also want the seller to sign off on an "Affidavit of Liens", a "Sellers Disclosure", and "Bank Authorization".

Protecting Yourself and Your Tenants in Sandwich Lease Options

Although you have the seller sign an "Affidavit of Liens", you still want to have the title researched to be sure there are no liens or that you at least know what the liens are. In most states (probably all states), you cannot purchase title insurance because with sandwich lease options, your name is not on the title. That is the reason for the "Affidavit of Liens". It says that the sellers are not aware of any pending liens and that should any arise, you will be formally notified. You can never be sure that the seller didn't recently have major repairs made to the septic system and failed to pay for it or something similar.

The title work will also show the names of all owners on the title. More than once, there has been a divorce involved where one spouse has full ownership in the divorce paperwork but the title was never cleaned up. Something else I prefer to do is have both the wife and husband (all owners) sign even when only one of their names appears on the title. The name is different in various states but there is something called "dower rights" that give both spouses rights to the house even when only one of their names is on the title.

Something else that is vitally important to sandwich lease options is recording the "Memorandum of Option" with the county. It's not good enough to only have this document notarized. Recording it with the county puts the world on notice that you have a legal interest in the title. This makes it almost impossible for the current owner to refinance the home or sell it without your signed approval.