Lease-Option Deals

I understand the principle of a lease-option deal, but just finished a book that suggested using a lease-option on both sides of the transaction. In other words, lease a home (no money down) with an option to buy, then find a tenant to lease it with an option to buy (at a higher rent and price), who gives you a big option fee up front. Have any of you had experience with these, and with what results?

The authors use examples where they put no money down, then collect $8,000 to 15,000 as a non-refundable option fee (applied towards the purchase price, of course). It seems it would be difficult to find sellers that will lease to you for years while letting you sub-let it, and really tough to find buyers with money for large option fees that wouldn’t just go out and buy a home. Any success stories here using this method?

Experience:

I am a fan of lease options. They can work. Maybe you or I would not put a permission to sublet clause in our leases but some people really do! While others reserved the opportunity to qualify a sub-let tenant, another did not.

The situation with which I got the deal was atypical but not completely uncommon.

I happened on a man who bought several properties in a short time and was overwhelmed. He had a vacant condo unit that was empty for 3 months.

He was so happy to rent it to a decent tenant that when I asked politely, he let me alter the lease.

Here is the actual sublet clause from my lease:

7. Assignment and Subletting. Tenant is authorized to assign lease or sublet the premises at tenant’s discretion.

By being able to assign the lease I didn’t need to re-lease. I could just SELL this lease , keep the money and walk away. But I didn’t do that.

I even stuck in a clause that he would pay my title insurance at closing when I bought the unit. Thank you to Carleton Sheets for that one. That saved me a few bucks. No one really knows what it means until it’s deducted from the seller’s side at closing. Then everyone goes scrambling for a copy of the lease. :slight_smile:

24. Evidence Of Title: Lessor shall provide evidence of Title in the form of a policy of title insurance at Lessor’s expense.

I know many lease options require the tenant to pay for repairs since he/she ultimately will own the place. Not the case here. To my good fortune the heating system let go 3 months into the lease. Seller paid.

End result:
I rented for 550/month
Re Rented for 670/month
I Purchased after 5 months at 41,500
I Sold after 3 months at 55,000

That was my ideal lease option experience.

Hope this helps
Good luck,
Jeff

P.S. 8-15k for an option seems kind of high,even for a pricier property.
Another option is getting 5 k and getting additional $$ by applying a portion of an elevated rent towards the down payment. (non refundable of course)

Also, people understand the term down payment better than option fee.

Thank you. I needed to hear a true story or two to get me motivated.