Been seeing more people talk about sandwich lease options lately and figured I’d share my experience trying this out on a few land deals over the past year.
For those unfamiliar, a sandwich lease option is when you get a lease option from a seller, then turn around and sell a lease option to an end buyer at a higher price. You’re basically the middle person collecting the spread between what you’re paying the original seller and what your buyer pays you.
I tried this on three properties last year. The first one was a 5-acre parcel in Arizona that the seller wanted $30k for. I negotiated a 3-year lease option at $500/month with $25k purchase price at the end. Then found a buyer who wanted to eventually build but needed time to save up - got them on a lease option for $750/month with a $35k backend price.
Sounds great on paper, right?
The good: Cash flow without ownership. I was making $250/month without actually owning the property or dealing with property taxes. The seller was happy getting monthly payments instead of waiting for a traditional buyer.
The tricky parts: You really need solid contracts. My attorney bill was substantial getting these structured properly. Also, when my buyer in deal #2 defaulted after 8 months, I still had to keep paying the original seller. That hurt.
The biggest issue I ran into was sellers getting nervous about the arrangement. Even with everything in writing, one seller tried to back out when they found out I was making money in the middle. Took some smooth talking to keep that deal together.
My take? It can work, but it’s not the easy money some gurus make it out to be. You need decent cash reserves for when buyers default, bulletproof contracts, and the ability to handle stress when things get messy. I’d only recommend it if you’ve already done regular land deals and understand the market really well.
Anyone else tried this? What was your experience?