Lease-Option is What % of the Real Estate Market???

Here’s my question:

Where can I find out what percentage of the real estate market is composed of lease-option opportunities?

I’ve tried looking at the census data, but it only gives me information on commercial establishments.

Can anyone help? Thanks!

I don’t see how this information could ever be compiled. These deals are not a part of the public record. For example, I have three lease options deals I am in the midst of right now. There is no official record of these. They are between myself and the other party.

I saw a recent figure posted that 86% of lease option tenants never complete the purchase.

Someone pulled a figure out of the air. I’d be interested in seeing the facts behind that figure.

It was probably based off a single company’s experiences, I’m sure like you said it was not pulled from public data. I’m sure in certain markets it would be higher or lower based on the market. I also think that number would greatly vary based on how the T/Bs are screened, amount of the option payment, etc. If someone is only seeing 14% cash out it sounds like they are taking anyone with a pulse on as a T/B, not at all being picky and finding folks that will be able to qualify for a loan at the end of the lease term. When you sign a lease with someone that has a 500 score how likely do you think they will be to get a loan in 1 year? What’s the odds that that 500 score is going to improve substantially in a year or two? Now the option money, if that number is small I’d think the odds of someone walking away from it are far greater. If they had 5% down I think they would do whatever they can to not walk from it (obviously you can’t stop job loss, divorce, death, etc).

In short I’m thinking the person that said 86% is either not properly handling his lease option deals or is someone that invests another way such as sub2 and is trying to draw the people that were considering lease options over to him.

It was published on a blog by a realtor who was discussing Coldwell Banker prohibiting its realtors nationwide from participating in lease options. He said he had seen figures indicating that 86% of tenants do not complete the purchase and that lease option gurus teach this as an added income stream which he called fraud. Your tenant defaults, you get another, and make another $5000 or so. He wasn’t being complimentary. I can’t find the link. It may well be that these figures refer only to lease options that go through traditional real estate companies, not private investors.

I’d like to know where this guy got his figures from. Also, from what you said it sounds like exactly what I was describing…putting anyone with a pulse into a deal regardless of their chances of qualifying for a loan at the end of the lease term. Very deceptive and shady, just another way people are making REIs look bad. And of course these types of people are probably the ones that caused the l/o laws to come about in many states.

As far as I’m concerned the 86% figure is rubbish and should not be considered valid to any investor setting up proper l/o deals.

That last sentence in trustpro’s post could very well be the case. I know from my experience in my local market that lease/options set up by realtors typically have a very high drop out rate. I blame it on two things:

  1. There are no realtors here who specialize in L/Os so they aren’t marketing to real T/Bs in the first place and have to take whatever comes along.
  2. They never get enough money down. In most cases the “TENANT/buyer” is paying exactly what they would pay in rent, and their deposit is exactly the same as renting as well. They also have no responsibilities toward caring for the property. So they don’t feel like anything has changed from their last rental.

All that aside, I believe the OP was referring to sellers. What percentage of all sales are lease/options, correct me if I’m wrong. Like AJ said it’s impossible to know what the numbers are because most L/Os go unrecorded. It also would vary widely from place to place and from time to time.

Right now I’d guesstimate that L/Os make up less than 1% of total sales in my area. In other markets L/Os could account for a very large percentage of sales because homes offered on traditional terms aren’t selling at all.