How Do Lease Options Work?

Lease Option's are really not that hard to complete. In essence you will have two contracts, a rental/lease contract and also an option contract. These forms can be found in our resources tab. When writing out the contract it is very important to keep a few things in mind.

The first step to executing a lease option as a seller is to find a contract you are comfortable with. There are many out there so make sure you and your attorney approve the one you are using.

Once you have a contract you should decide on some terms that you would be happy with. By term I mean purchase price, length of lease, how much of an option consideration you would like, what your rent/lease rate will be and the type of candidate you would approve to purchase your home via lease option.

After you have your terms ironed out, you should start looking for a proper candidate as a tenant/buyer for your house. Keep in mind that your terms will have to be adjusted based on the tenant/buyer and their situation and what they can afford. You will still be in the drivers seat as you can profit in three different ways. First is the sales price. You set this price based on an average appreciation you see as fair over the term length you and the tenant/buyer determine. The next is the amount of option consideration. Some sellers chose to deal with buyers who have a large option consideration available at the time the contract is signed. In some cases the option is never exercised and the monies are kept buy the seller. The third profit center is the amount of monthly lease/rent. In most lease options the seller does research to figure out the current market rent for their property and marks it up 10-20%. The main reason for this is because your tenant/buyer probably does not have the best credit and is prepared to pay more to live in such a great house while having the option to buy down the road.

Provide us your email address to continue reading through this page and the rest of the site!

Fill out this form to get access to our entre FREE E-Book. We will contact you shortly after you fill this out!