rent credits

When implementing rent credits into your lease option, I would imagine their are many tennat buyers who at times say they will pay the rent, but don’t feel like paying the rent credit “this month.”

How can you arrange your contract to avoid this situation so rent and rent credit will be paid in full?

Say you offer a property for $1,000/month with $300/month rent credits. This is accomplished with 2 contracts. The first contract is a lease of the property for $1,000/month. If the tenant does not pay the full $1,000, then they are violating their lease and subject to eviction. The 2nd contract is an option to purchase. This contract specifies the purchase price, option payment, and rent credits. It has wording to the affect that if you pay your $1,000 on time, then I’ll give you a rent credit of $300. Your option contract should not refer to this money as a deposit on the house but rather a credit off the purchase price.

Makes sense,

So in the end, your tenant must pay the full amount stated(assuming you have two contracts correctly drafted). If they don’t, then the rent credts are not applied, and they are subject to eviction just like any other lease.


One more question in relation to the last:

Would it be wise to also have a security deposit along with the option payment just in case some bastard tennat decides to back out on the option, makes a fuss, and demand back his option payment(which I understand is not refundable). I’m sure their are tennants who don’t understand the wording of these contracts, try to get their money back and at times win since the evection courts also don’t understand the wording and assume the option payment is a security deposit.

I figure if you have both, the option payment and the security deposit there’s no question as to the purpose of both. Do you have any thoughts on this or do you just think I’m paranoid and crazy :banghead

I’ve heard that some people ask for security deposits in addition to option payments, but we ( I have a partner) don’t. I think I would have a hard time getting 1st month’s rent plus option payment plus security deposit from prospective tenant.

Our option contract has in capital letters a statement that option payments are not refundable and the tenant has to initial beside the line in addition to initialing each page and signing last page. The option contract is separate from the lease contract and evictions are based upon the lease. Hopefully your screening will weed out tenants that tear up the place.

I agree with NCREI. It should be very clear upfront to the tenant buyer that the option money is non-refundable. As far as a security deposit, it would be a little tougher, but it’s completely up to you. I always tell my tenant buyers verbally and written in black and white that the option fee is non-refundable. If they have a problem, I explain to them why it is that way, and if that is not good enough, then I move on to the next. Some people will get it and some people won’t. You have to keep moving forward.