Sandwich Lease

A sandwich lease is a strategy where an investor leases a property from the owner with an option to buy, then subleases it to a tenant-buyer at a higher rent with a higher-priced option.

A sandwich lease puts an investor in the middle of two lease options. The investor leases a property from the owner with the right to sublease and an option to buy, then leases it to a tenant-buyer at a higher rent with their own option at a higher price. The investor never owns the house during the lease — what they own is the spread between the two agreements.

Hypothetical numbers: an investor leases from an owner at $1,000 a month with an option to buy at $130,000, then subleases to a tenant-buyer at $1,300 a month, collecting a $5,000 option fee against a $150,000 purchase price. While both leases run, the investor cash-flows $300 a month. If the tenant-buyer exercises, the investor buys at $130,000 and sells at $150,000 — roughly $20,000 on the back end, with the option fee credited per the contract. If nobody exercises, the investor keeps the fee and the monthly spread.

What beginners miss is that the middle of the sandwich carries obligations in both directions. If the tenant-buyer stops paying, the investor still owes the owner every month — vacancy comes out of your pocket on a house you do not own. The owner's lease must permit subleasing in writing, the option must clearly survive the sublease, and both layers need real documents, because state rules on lease options apply to each one. Line up the paperwork before you line up the tenant. This is not legal advice.