L/O Credit Applied to Down, or Purchase price. Which is Best

I have heard that some investors on their Lease/Option deals allows a percentage of the lease payments (Rent Credit, Option consideration, etc) to be applied as part of your down payment. On the deals that I have done, I have always told the T/B that their rent credit would be subtracted from the purchase price. My thought is that most T/B’s would prefer the rent credit be applied as part of the down payment.

Is it a big deal with most Mortgage Brokers to apply the rent credit as part, or all of the down payment when the T/B gets their own loan?


What I usually do is explain that I don’t know how the lender will allow the funds to be applied. Some may allow it as a down payment, others may not. I simply tell the TBer that we will structure the transaction however the lender requires to ensure they do get credit for those funds.

I haven’t run across it yet, but I have heard of lenders rejecting or decreasing rent credits because the amount was too large. What I’ve been told (for example) is that offering more than $200 per month on a $1,000 payment could cause problems. Whether or not that’s true I don’t know, but it makes sense to me.

Yes, the TBer would always want the credits applied toward out-of-pocket costs as opposed to a price reduction, but that’s out of our control.


I have always been able to get the Option Consideration placed as the “down payment” when cashed out with a new loan from the buyers.

I don’t do a whole lot of L/O where I give rent credits, though I did do one with $100 a month. THat was before I learned not to say anything about a rent credit.

There was no issue with the $100 being taken off of the sales price, in that case.

Terry (Houston)

Thanks Tim and Terry for the replys.

Terry- If you are not giving rent credit to your T/Bs, then are you just giving them a option to buy at a set price?


That is about it. Just the option to buy. I may give one if someone smart asks for it. But that does not happen too much.

Make sure that the money you give is a part of your asking price.

Good luck