Your Experience on Lease Option and Lease Purchase to Buy

[Tamyra Campbell]

Hey BP, 

So I'm diligently studying videos, podcast, from BP, and currently I'm reading books like "Flip" by Clay Davis, and The Millionaire Real Estate Investor by Gary Kellier. Both of these books introduced me to Creative Investing that's a bit different from the BP BRRRR.

One book mentioned the basics of "Lease Option" and "Lease Option to Buy" with the seller. 

My question is, has anyone ever used either or both of these methods in other to finance a property? If so, what was your experience like from discussion these methods as a payment option to the seller? What was the outcome?

Thanks, Tam -

[Chris Mason]

Most mortgage loan applicants referred to me to help them finance a property they signed a lease option on, one or two years ago, aren't qualified. Either their FICO score didn't magically go up 150 points, or they didn't use those years saving up a down payment ("something" always comes up), or they switched careers and have been 1099 for 3 months, or maybe even something else completely beyond their control.

Most of the time, these folks would have been better off in a normal market-rate rental, rather than having paid a non-refundable option fee and/or above-market rents for 12-24 months and/or paying for all the maintenance during that time.

Most of the time, rent to own is a killer deal and a slam dunk... for the landlord. Non-refundable option deposit, above market rents, no cap-ex, no 2 AM phone calls, and a tenant that cares for the property like they own it? What's not to love?

There are one-off circumstances where the above does not hold true, particularly when it's a wealthy family member doing a favor for their not so wealthy family members.

If anyone wants to get excited and use this strategy as a landlord, keep in mind that if you do not sacrifice enough goats to the Real Estate Gods, the first tenant you do this with will end up one that's actually qualified (or that is magically a cash buyer due to an inheritance), and then you gotta sell it to them for that discounted sticker price that was your hook, because hey it says right there in writing that you would. Use this strategy if you wish, but ensure you keep up with your goat sacrifices to the RE Gods!