First thanks everyone for all the great answers I see to others’ posts as well as my own.
With that, the one point I am not clear on with lease options is whether or not the monthly lease payments made by both yourself to the seller and by your buyer-tenant actually goes toward the buyout?
Any help with this would be greatly appreciated.
There is no standard way to do it.
Personally, I try to negotiate a rent credit with the seller so that I have more flexibility when offering it to the tenant buyer. I usually ask for about $200/month which I then offer to the TBer. Sometimes, if there’s enough spread in the deal I will offer more of a credit to the TBer to try to lock them into the deal.
Just remember, with rent credit, that nothing is required and everything is negotiable. Good luck!
A better approach to take with a sandwich lease is to simplify the deal for the owner. Talk of rent credits is just one more thing for them to say no to and kill the deal.
Instead, negotiate the best possible price you can with the homeowner. It’ll be easier and less confusing, and increase the likelihood of the deal passing scrutiny.
Then, offer your t/b a generous rent credit. This will fill your property quickly, which is no small feat in today’s market.