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Define Sandwich Lease in Real Estate
Sandwich Lease:
A sandwich lease is a type of lease agreement where the lessee (the person who leases the property) becomes the lessor (the person who subleases the property) to another party. This means that the lessee is neither the owner nor the end-user of the property. In a sandwich lease, the lessee leases the property from the owner and then subleases it to a third party, acting as both the lessee and lessor at the same time. This allows the lessee to collect rent from the sublessee and pay rent to the owner for the same property.
Example:
Let's say John leases a house from the owner for $1,000 a month. John then subleases the house to his friend Tom for $1,200 a month. John is now acting as both the lessee and lessor, collecting rent from Tom and paying rent to the owner. John earns a profit of $200 a month from the sublease.
"A Deep Dive for Real Estate Agents and Appraisers"
There are a few things you should know about sandwich leases:
- While sandwich leases can be profitable, they can also be risky. If the sublessee doesn't pay rent or causes damage to the property, the lessee (you) will be responsible for paying the owner (the original landlord) and repairing any damages.
- It's important to have a written agreement between you and the sublessee that outlines the terms of the sublease, including rent amount, duration of the sublease, and any rules or restrictions.
- Sandwich leases are not legal in all states. Some states have specific laws and regulations regarding subleases, and some landlords may include a clause in their lease agreement prohibiting subleasing.
"Wit & Whimsy with the Dumb Ox: Unlocking Knowledge with Rhyme:"
A sandwich lease, a sandwich lease,
It's when you lease a place, oh geez!
But then you sublease it too,
To someone else, it's quite the coup!
You're not the owner, no not quite,
But you're the landlord, it's quite a sight!
You pay rent to the owner, yes siree,
And collect rent too, oh how can that be?
You're in the middle, a sandwiched deal,
Leasing and subleasing, it's quite the steal!
You earn a profit, oh what a feat,
With a sandwich lease, it's quite the treat!