How Lease Options Work

[Hart Hagan]

Ok, I know this is a big topic, but I have some questions about how lease options work.

For example,

If I put a house under contract, should I seek to get an exclusive right to market the house? I've heard some say that it's an easier sell if the seller continues to have the right to sell the house, e.g., through a realtor.

Can anyone share the option contract, the lease contract, or other contracts that come into play in these deals?

Do you have a checklist of things to do after the contract is signed. For example, one investor I know works with a realtor to find the tenant-buyer. The checklist makes it clear what is to be done.

How do you market the house to find tenants? Two investors I know take pictures and then use vflyer, which publishes the same ad to numerous sites, including zillow, trulia, ebay classified, and others.

If you do a direct mail campaign, what demographics do you target? I was thinking about targeting homes with out of state owners, with a value of 125-250k, that have been purchased in the last 1-3 years.

Thanks for any input.

[Seth Williams]

Hi Hart,

The seller having the "right to sell the house" as you referred to above is called the "first right of refusal". I don't include this provision in my standard contracts unless the seller demands it.

When I do include it, the language looks like this:

First Right of Refusal: The buyer and seller agree that the seller retains the right to keep this property on the market and to accept other offers on said property. If the seller desires to accept another offer, seller must notify buyer or buyer's agent by email at ___________ or by mail at ______________. The buyer will have 14 days from receipt of seller's notice to exercise this Option and provide evidence of their ability to perform the terms of this agreement (i.e., confirmation from the bank as to financing, proof of bridge loan, accepted purchase contract on buyer's property). If buyer cannot supply such evidence, then this agreement is voidable at the option of the seller. If the seller voids this contract, then the option consideration will be returned to the buyer within 14 days. Time is of the essence as to this provision.

For marketing the property to tenants, I generally use postlets.com and post several ads to craigslist.com and backpage.com. There are some pretty helpful listing headlines you can use to find tentants, for example:

"STOP Throwing Away Your Money on Rent. RENT TO OWN!
Awesome Properties, Amazing Neighborhoods, No Qualifying"

Anyway... this post is getting long - I should stop now.