Control Without Ownership
A homeowner needed to relocate for work but didn't want to sell below market in a slow market. She wasn't ready to become a traditional landlord, but she needed someone to handle the property and cover her mortgage while she was away.
Lisa approached her with a lease option: she would lease the property from the owner for $1,620/month (covering the owner's mortgage), with an option to purchase at $252,000 within 24 months — a price negotiated below the $280,000 appraised value. Lisa paid $3,000 for the option right.
Lisa then found a rent-to-own tenant: a family who wanted to buy but needed 18–24 months to repair their credit. They paid $2,000/month — a $380 premium over Lisa's lease payment. They also put down $5,000 as an option deposit with Lisa, covering her initial $3,000 cost entirely.
I controlled an asset worth $280,000 for a $3,000 deposit. That's leverage most people don't realize is legal — or even possible.
— Lisa, Lease Option InvestorMonthly Spread + Built-In Equity Over 24 Months
The Sandwich Lease Option
| Party | In | Out |
|---|---|---|
| Owner → Lisa | $252k purchase option | $1,620/mo lease payment |
| Lisa → Tenant | $2,000/mo rent | $280k purchase option |
| Lisa's spread | $380/mo | $28k equity at exercise |
| Lisa's option deposit | $3,000 paid | $5,000 received (net +$2k) |
When the tenant exercises their purchase option at $280,000, Lisa simultaneously exercises hers at $252,000. The $28,000 difference is her profit — on a deal that cost her $3,000 to enter.
Key Takeaways
- A lease option gives you the right — not the obligation — to purchase a property at a set price. You control the asset without owning it.
- The "sandwich" structure works by creating two lease options: one with the owner (buy low) and one with the tenant (sell higher). The spread is your profit.
- Rent-to-own tenants typically pay premium rents and maintain properties better than traditional renters — they have skin in the game.
- If the tenant doesn't exercise their option, you keep their deposit and may find a new tenant. If the market appreciates, your locked purchase price becomes even more valuable.
- Always use a real estate attorney to structure lease option agreements. Proper documentation protects all parties and ensures the transaction is legally sound.
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